## Present Value of a Perpetuity:

An annuity is a stream of cash flows of the same amount that is payable for a predetermined period of time. Many fixed incomes are distributed in the form of an annuity, e.g., pension. A special kind of annuity runs forever, and is called a perpetuity. The present value of a perpetuity is equal to the periodic payment divided by the discount rate.

The value of the annuity today is \$4,478.

The present value of cash flow for year 1 through 5 is {eq}\sum_{t=1}^{5}{\frac{640}{(1 + 10\%)^t}} =...

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