just got a question regarding PV perpetuity..
in schewser notes, theres an example where pv perpetuity is $56.25 when the rate ie 8% and pmt is 4.5, when pv perpetuity becomes $75, the rate of return becomes 6%..i dont understand this….if an investor is willing to pay more for a preferred stock for example ($75 compared to $56), wouldnt that mean the rate of return would be greater since they are willing to spend more for the stock? thus should reflect a higher return rate? |