Chapter 7 Perpetuities and Annuities PDF

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Chapter 7 Perpetuities and Annuities Perpetuity  A perpetuity is a stream of equal payments that are expected to continue forever. A perpetuity is a special case of an annuity in which the number of equal cash flows is infinite.  An Ordinary Perpetuity is a perpetuity whose payments occur at the end of each period. The first cash flow comes at the end of period 1.



A Perpetuity Due is a perpetuity whose payments occur at the beginning of each period. The first cash flow comes at the beginning of period 1.

 A perpetuity can also take the form of a series of cash flows expected to grow at a constant rate forever. • The timeline for a growing perpetuity is

• The present value of a

growing perpetuity is

Annuities  An annuity is a series of payments of an equal amount at fixed intervals for a specified number of periods. – An Ordinary Annuity is an annuity whose payments occur at the end of each period. The first cash flow comes at the end of period 1.

– An Annuity Due is an annuity whose payments occur at the beginning of each period. The first cash flow comes at the beginning of period 1.

 An annuity can also take the form of a series of constantly growing payments at fixed intervals for a specified number of periods....