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$15,000 is the present value of Perpetuity A which pays $500 at the beginning of each...

$15,000 is the present value of Perpetuity A which pays $500 at the beginning of each year with the first payment starting today. $6,834 is the present value of Perpetuity B which pays $550 at the beginning of each year, with the first payment starting n years from today. Determine the present value of an annuity-due that makes payments of $55 each year for n years.

Expert Solution

Formula for present value of perpetuity at beginnig of each year is given below:

For perpetuity A,

Perpetuity B

Replace 1/29 for i,

take log on both side

Present value of annuity due

jeff jeffy answered 2 years ago

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