A friend who owns a perpetuity that promises to pay $1,000 at the end of each year, forever, comes
to you and offers to sell you all of the payments to be received after the 25th year for a price of
$1,001. At an interest rate of 10%, should you pay the $1,000 today to receive payment numbers 26
and onwards? What does this suggest to you about the value of perpetual payments?

Question

Quizplus · Accepted Answer

The Answer of A friend who owns a perpetuity that promises to pay $1,000 at the end of each year, forever, comes
to you and offers to sell you all of the payments to be received after the 25th year for a price of
$1,001. At an interest rate of 10%, should you pay the $1,000 today to receive payment numbers 26
and onwards? What does this suggest to you about the value of perpetual payments?

A Friend Who Owns a Perpetuity That Promises to Pay