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Growth and Interest Rates


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

Select ALL that may apply.


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


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.


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


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