SOLUTION: I just wanted to know the steps on how to get the answer because I know the answer is $21,370, but I am unsure of the steps that need to taken.
A perpetuity will pay $1,000 per
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-> SOLUTION: I just wanted to know the steps on how to get the answer because I know the answer is $21,370, but I am unsure of the steps that need to taken.
A perpetuity will pay $1,000 per
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Question 1019759: I just wanted to know the steps on how to get the answer because I know the answer is $21,370, but I am unsure of the steps that need to taken.
A perpetuity will pay $1,000 per year, starting 5 years after the perpetuity is purchased. What is the present value of this perpetuity on the date that it is purchased, given that the interest rate is 4%?
I would appreciate your help.
Thanks Answer by FrankM(1040) (Show Source):
You can put this solution on YOUR website! The annuity would be worth $1000/.04 = $25000 at the time it begins.
To get to now from 5 years hence,
$20548.18
Note - your $21,370 incorrectly assumed $26000 value in 5 years.
