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Growth and Interest Rates

CORPFN-MBGVM4

Which ones of the following choices represent accurate statements about growth rate and interest rate?

Select ALL that may apply.

A

The only realistic perpetuities are those with a growth rate less than the interest rate.

B

Perpetuities with a growth rate greater than the interest rate exist in practice. They have a higher present value than perpetuities with growth rate less than interest rate.

C

The growth rate can be greater than the interest rate in a growing annuity but not in a growing perpetuity.

D

The perpetual growth rate can never be greater than the interest rate, but it can be equal.