Which of the following is TRUE about perpetuities?
A)Since a perpetuity generates cash flows every period infinitely,the cash flow generated equals the PV times the interest rate.
B)Since a perpetuity generates cash flows every period infinitely,each cash flow must be discounted to calculate the present value.
C)Since a perpetuity generates cash flows every period infinitely,there is no way to solve for the cash flow given the present value and the interest rate.
D)A perpetuity does not generate cash flows every period infinitely.
E)Since a perpetuity generate cash flows every period infinitely,the cash flow generated equals the PV divided by the interest rate.

Question

Quizplus · Accepted Answer

A perpetuity generates cash flows every period infinitely, and each cash flow is equal to the amount of the payment. Therefore, the total cash flow generated equals the present value of the perpetuity multiplied by the interest rate.

Which of the Following Is TRUE About Perpetuities