I am trying to work out how to value the following transactions. It should be straight forward, since it breaks down into a series of well known instruments, yet I am not sure how to evaluate it:

1. Receive Cash payment amount of $X 2. Subsequent pay out $Y per calendar month into perpetuity
2. Have the option to "close out" the implied perpetuity, by paying the original received $X amount, any time after 1 year.

I would like to know how to value such an instrument, which consists of effectively:

• a perpetuity
• an embedded option

If I was to make such an instrument available to someone, how much would I sell it for?

as an interesting aside, this is cleary a debt instrument, and would be recorded in the other parties 'liability column'. What value would be recorded in the books? - clearly, not the original $X ...?

I am trying to work out how to value the following transactions. It should be straight forward, since it breaks down into a series of well known instruments, yet I am not sure how to evaluate it:

1. Receive Cash payment amount of \$X
2. Subsequent pay out \$Y per calendar month into perpetuity
3. Have the option to "close out" the implied perpetuity, by paying the original received $X amount, any time after 1 year.

I would like to know how to value such an instrument, which consists of effectively:

• a perpetuity
• an embedded option

If I was to make such an instrument available to someone, how much would I sell it for?

As an interesting aside, this is clearly a debt instrument, and would be recorded in the other parties 'liability column'. What value would be recorded in the books? Clearly, not the original $X ...?