1. You are interviewing for a finance job and the interviewer asks:” What is the value of $100 per year forever if the appropriate discount rate is 8%?”
2. In the question above if you waited until the end of year 10 to buy the perpetuity what is the value at that point in time?
3. In question 1, if the $100 perpetuity grew at a constant rate of 2%, and the discount rate was still 8%, how much would you pay for it?
4. If you waited 10 years to buy the constant growth perpetuity in question 3 above, how much would you pay for it at the end of year 10?