"PERPETUITY. An annuity whose payments begin on a fixed date andcontinue forever. Payment interval PAYMNINT is time between successive payments of PERPAYMN and investor interval INVESINT is investor's desired compounding interval. Three cases: Payment interval 1) coincides with interest period (simple case) PAYMNINT=INVESTINT, 2) is less than interest period PAYMNINT< INVESTINT or 3) is greater than interest period PAYMNINT>INVESTINT. PAYMNINT andINVESTINT are intervals in months. FREQCONP and FREQCONI are numbers of payment/interest intervals in one year. ANNRATE% is perpetuity's nominal rate required to yield investor's nominal rate of INVRATE%. PRESVALU is the present value of the perpetuity. Note: intervals, day=1/30, month=1, quarter=3, semiann.=6, etc. *** Answers to problems *** (c) Copyright PCSCC, Inc., 1993 (a) Set INVESINT=3, INVRATE%=7.5, PAYMNINT=3, PERPAYMN=1.21. Pay PRESVALU=$64.53(b) Now set INVESINT=1/30 (=3.333E-2), INVRATE%=7. Pay PRESVALU=$68.55. (c) Now set INVESINT=12, INVRATE%=8. Pay $62.29. Type any key to exit. ||The ABC Company is expected to pay a dividend of $1.21 every quarter (1 every 3 months). (a) What should an investor pay for the stock if money is worth 7.5% compounded quarterly? (b) 7% compounded daily (1/30 mo)? and(c) 8% effective (12 mo)? Type comma key to see answers. Type (F2) to return to help file."
