Asked by
Sonam Nayak
on Dec 14, 2024
Verified
A wealthy benefactor has donated $1,000,000 to establish a perpetuity that is to pay a constant payment once per month. The money will earn 10% compounded annually. The first monthly perpetual payment will be made 28 months from now. Determine the size of the payments.
A) $9,960
B) $10,000
C) $9,881
D) $8,603
E) $10,047
Compounded Annually
Pertains to the calculation of interest on both the initial principal and the accumulated interest from previous periods, applied once per year.
Perpetuity
A financial instrument that pays a constant stream of interest payments indefinitely.
- Master the understanding of perpetuity and the techniques to compute payments for perpetuities.
- Gain an understanding of the core principles behind time value of money calculations.
- Leverage financial mathematics to investigate and tackle genuine financial situations pertaining to savings, loans, and investments.
Verified Answer
VG
Learning Objectives
- Master the understanding of perpetuity and the techniques to compute payments for perpetuities.
- Gain an understanding of the core principles behind time value of money calculations.
- Leverage financial mathematics to investigate and tackle genuine financial situations pertaining to savings, loans, and investments.