Example: Computing Perpetual Annuities - Texas Instruments BA II PLUS User Manual

To
Compute present value
(ordinary annuity).
Set beginning-of-period
payments.
Return to calculator mode.
Compute present value
(annuity due).
The present value of the savings is $122,891.34 with an ordinary
Answer:
annuity and $135,180.48 with an annuity due.

Example: Computing Perpetual Annuities

To replace bricks in their highway system, the Land of Oz has issued
perpetual bonds paying $110 per $1000 bond. What price should you pay
for the bonds to earn 15% annually?
To
Calculate the present value for a
perpetual ordinary annuity.
Calculate the present value for a
perpetual annuity due.
You should pay $733.33 for a perpetual ordinary annuity and
Answer:
$843.33 for a perpetual annuity due.
A perpetual annuity can be an ordinary annuity or an annuity due
consisting of equal payments continuing indefinitely (for example, a
preferred stock yielding a constant dollar dividend).
Perpetual ordinary annuity
30
Press
% .
& ] & V
& U
% .
Press
110
H
Time-Value-of-Money and Amortization Worksheets
PV=
BGN
PV=
6 2 N
15
N
110
Display

122,891.34
0.00

135,180.48
Display
733.33
843.33