"Rosser Jr, John Barkley" wrote: > Henry, > Every present value formula actually goes to infinity, > although often the entries are zeroes after some finite > point in time. > Barkley, please read carefully. I wrote : "I cannot conceive a present value formula that covers 200 years." A present value is the value today of a future payment, or stream of payments, discounted at appropriate discount rate. Present value formulae are not natural laws. They are set by users based on judgement. Every present value formula has a set date beyond which present value is assigned a value of zero by the user. Beyond that date, the formula ceases to function. That date occurs way before 200 years in busisness applications. When I say that I cannot conceive of one that covers 200 years, it is entirely my perogative to say so. It means I will not assign a value to any future payment up to that date. It is a declarative truism. Your statement: "Every present value formula actually goes to infinity", is false. One can choose to set the zero present value date at infinity, but that would be an exercise in futility. Even in interantional politics, when France sold Louisiana to America, it did not use a 200 year present value formula. Extending present value to infinity has no mathematical or financial value. For business calculations, division by infinity has no application. Infinitely lived consols, first issued in 1751 by the British government, are interest bearing government bonds having no maturity date but redeemable on call. The present value calculation used by buyers did not use infinity as a date. Their prices in the secondary market were determined by 30 year present value calculations, constantly extended until called. Infinity did not enter into the claculations. Anyway, Victoria England did a lot of weird things. Henry C.K. Liu
