Which of the following statements regarding perpetuities is FALSE?
A) To find the value of a perpetuity one cash flow at a time would take forever.
B) A perpetuity is a stream of equal cash flows that occurs at regular intervals and lasts forever.
C) PV of a perpetuity =
D) One example of a perpetuity is the British government bond called a consol.

Question

Which of the following statements regarding perpetuities is FALSE?
A) To find the value of a perpetuity one cash flow at a time would take forever. 
B) A perpetuity is a stream of equal cash flows that occurs at regular intervals and lasts forever. 
C) PV of a perpetuity = 
D) One example of a perpetuity is the British government bond called a consol.

Quizplus · Accepted Answer

The notation in choice C is not a valid formula for calculating the present value of a perpetuity. The correct formula is PV = C/r, where C is the regular cash flow and r is the discount rate.

Which of the Following Statements Regarding Perpetuities Is FALSE