1. Find the value of a British consol that pays $25 per year in perpetuity. The interest rate on investments of comparable risk is 5.2%.
2. What is the present value of an investment that will pay $100 per year forever if the required rate is 10%?
3. You have the opportunity to buy a perpetuity that pays $1,000 annually. Your required rate of return on this investment is 15 percent. What is the maximum that you should be willing to pay for this investment?