Perpetuities and Annuities - Corporate Finance - Ivo Welch

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An insurance company offers a retirement annuity that pays $100,000 per year for 15 years, growing at an “inflation-compensator” rate of 3%, <strong>and</strong> sells for $806,070. What is the interest rate? 42/1
The prevailing interest rate is 10%/year. If you put aside $1,000,000 to cover 18 years of expenses, how much could you draw down each year? 43/1
Page 1 and 2: Perpetuities and Annuities (Welch,
Page 3 and 4: General Questions ◮ Are there any
Page 5 and 6: Simple Perpetuities A perpetuity is
Page 7 and 8: ...in another language ◮ If you k
Page 9 and 10: What is the value of a promise to r
Page 11 and 12: What is the perpetuity formula if t
Page 13 and 14: Growing Perpetuities A growing perp
Page 15 and 16: How can a growing infinite sum be l
Page 17 and 18: What is the value of a firm that ju
Page 19 and 20: In 10 years, a firm will have annua
Page 21 and 22: What should be the share price of a
Page 23 and 24: The Gordon Dividend Growth Model
Page 25 and 26: Annuities An annuity is a financial
Page 27 and 28: Annuity Example: Mortgage Loan Here
Page 29 and 30: Omitted: Principal and Interest Dec
Page 31 and 32: What is the PV (or cost) of project
Page 33 and 34: What if you need to use the buildin
Page 35 and 36: Why is this EAC stuff in the annuit
Page 37 and 38: What are the payments to a 5% semi-
Page 39 and 40: Is the coupon rate of a bond equal
Page 41: An insurance company offers a retir
Page 45 and 46: Assume that our firm has stopped gr
Page 47 and 48: An example drawn from an actual aut
Page 49 and 50: If you took out a loan from the ban
Page 51 and 52: Should you use perpetuities? How lo
Page 53: Omitted, but in the book ◮ Proof

Perpetuities and Annuities - Corporate Finance - Ivo Welch

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