What happens to the value of a perpetuity

Reference no: EM13260011

Most annuities call for payments to be made over a finite period of time, for example, $1,000 per year for three years, but some annuities go on indefinitely and these are termed perpetuities.

What happens to the value of a perpetuity when interest rates increase? What happens when interest rates decrease. Explain why these changes occur.

Reference no: EM13260011

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