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Understanding Perpetuities in Finance Quiz

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1. What is a perpetuity?

2. How is the present value of a perpetuity calculated?

3. Which of the following is an example of a perpetuity?

4. What is a growing perpetuity?

5. How is the present value of a growing perpetuity calculated?

6. What happens to the present value of a perpetuity if the interest rate increases?

7. What is the major difference between perpetuity and annuity?

8. What does the perpetuity method of company valuation assume?

9. In the context of perpetuities, what is the interpretion of the discount rate?

10. If the interest rate is greater than the growth rate, what will be the present value of growing perpetuity?