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Pill 042 / 180 · Quantitative Methods Free sample

Time Value of Money: Present Value of a Perpetuity

A perpetuity pays a fixed amount forever. Because payments never end, you can't sum them one by one — but the geometric series collapses to a single division:

PV = PMT / r

Two things the exam loves to test: the formula gives the value one period before the first payment, and preferred stock with a fixed dividend is the classic real-world perpetuity.

A preferred stock pays a fixed $4.50 annual dividend. If the required return is 6%, its value is closest to:

✓ Correct — PV = 4.50 / 0.06 = $75.00. Answer A multiplies instead of dividing; answer C slips a decimal.

Pill 007 / 180 · Ethical & Professional Standards Subscribers

🔒 Standard III(A) Loyalty, Prudence, and Care — who is the client when you manage a pension? Unlock all 180 pills

Standard III(A): Loyalty, Prudence, and Care

When managing a pension plan, your duty of loyalty runs to the beneficiaries of the plan, not to the sponsoring company that hired you. This distinction is one of the most frequently tested points in the Ethics section, and the exam will often present a scenario where the plan sponsor pressures the manager.

Client = beneficiaries, not the sponsor

Pill 118 / 180 · Fixed Income Subscribers

🔒 Duration — why a 5-year bond doesn't move like a 5-year bond. Unlock all 180 pills