A perpetuity will pay you $100 starting next year and continuing at that level forever.The appropriate discount rate for the perpetuity is 10%.Calculate the present value of (1)the infinite stream of payments,i.e.,the entire perpetuity,and (2)the first 20 payments.Compare these two present values and comment on what they can tell you about the present value of the perpetuity's payments in the very distant future (i.e.,payments made later than 20 years in the future).

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The Answer of A perpetuity will pay you $100 starting next year and continuing at that level forever.The appropriate discount rate for the perpetuity is 10%.Calculate the present value of (1)the infinite stream of payments,i.e.,the entire perpetuity,and (2)the first 20 payments.Compare these two present values and comment on what they can tell you about the present value of the perpetuity's payments in the very distant future (i.e.,payments made later than 20 years in the future).

A Perpetuity Will Pay You $100 Starting Next Year and Continuing