Problem

1. What is a perpetuity? What is the PV @ time zero of a perpetuity if the first payment begins at period 1? Fill in the blanks: A perpetuity has equal ______, over equal ______ for an infinite amount of time.

2.Delayed Perpetuity: A delayed perpetuity is simply a perpetuity that is delayed, i.e. the first payment does not begin until some point in the future, such as end of period "t". What is the PV time zero of a perpetuity if the first payment begins at period t? For example: What is the PV time zero of a perpetuity of $800 per period if the first payment is received at the end of period 7 and the required return is 11% per period?

3. What is a growing perpetuity? Compare/contrast this to a ‘simple' perpetuity.