Perpetuities and Annuities - Corporate Finance - Ivo Welch
Perpetuities and Annuities - Corporate Finance - Ivo Welch Perpetuities and Annuities - Corporate Finance - Ivo Welch
Write out what the perpetuity formula, ∑ ∞ t=1 C (1+r) t means! 6/1
...in another language ◮ If you know how to program, the summation ∑ 100 i=1 f (i) is the same as sum ⇐ 0.0 for i from 1 to 100 do begin ◮ sum ⇐ sum + f (i) end return sum Again, note that i is not an input variable—instead, it is a device to indicate that we have 100 terms which we want to sum up. That is, when you write out the formula, there is no i in it! ◮ IMHO, programming teaches logical thinking. In many jobs, you need to know how to do basic programming, too. Thus, I can recommend taking an introductory programming course to any student. 7/1
- Page 1 and 2: Perpetuities and Annuities (Welch,
- Page 3 and 4: General Questions ◮ Are there any
- Page 5: Simple Perpetuities A perpetuity is
- 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 and 42: An insurance company offers a retir
- Page 43 and 44: The prevailing interest rate is 10%
- 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
...in another language<br />
◮ If you know how to program, the summation ∑ 100<br />
i=1 f (i) is the<br />
same as<br />
sum ⇐ 0.0<br />
for i from 1 to 100 do<br />
begin<br />
◮<br />
sum ⇐ sum + f (i)<br />
end<br />
return sum<br />
Again, note that i is not an input variable—instead, it is a device<br />
to indicate that we have 100 terms which we want to sum up.<br />
That is, when you write out the formula, there is no i in it!<br />
◮ IMHO, programming teaches logical thinking. In many jobs, you need to<br />
know how to do basic programming, too. Thus, I can recommend taking<br />
an introductory programming course to any student.<br />
7/1
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