Business, 20.07.2019 04:30 Calirose

Perpetuities are also called annuities with an extended or unlimited life. based on your understanding of perpetuities, answer the following questions. which of the following are characteristics of a perpetuity? check all that apply. the value of a perpetuity cannot be determined. the current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.

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The current value of a perpetuity is based more on the discounted value of its nearer (in time) cash flows and less by the discounted value of its more distant (in the future) cash flows.

Explanation:

The perpetuities can becalculate as follow

C/rate = Perpetuities

the reasoning behind this formula:

$C * \frac{1-(1+r)^{-time} }{rate} = PV\\$

If we calculate limit whe ntime is infite,

because at more time 1 + r gets closer and closer to 0

we get on the dividend

1 - 0

So we have C x 1/i = C/i

Next part would be why the first cash flow is more relevant than the subsequent cash flow:

$\frac{Principal}{(1 + rate)^{time} } = PV$

Here if time increases, then the divisor get closer to ∞ so we have

P ( a constant) /∞ = 0

So the first cashflow is more relevant than the more distant cash flow

Answer from: Quest

pretty sure c

explanation:

Answer from: Quest

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans.

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.

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Perpetuities are also called annuities with an extended or unlimited life. based on your understandi...

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