Sydney will fund a scholarship that will provide payments of $25,000 per year in perpetuity, with...

Sydney will fund a scholarship that will provide payments of $25,000 per year in perpetuity, with the first scholarship payment to be paid 20 years from today. She is considering two options:

Option A: Pay $22,974,73 at the beginning of each year for the next 20 years.

Option B: Pay $K per year at the end of the year for the next 5 years.

The effective annual interest rate is constant and the present value of option A is equal to the present value of option B.

Calculate K.

Expert Solution

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ekkarill92 answered 2 years ago

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