5. You are willing to pay $15,625 now to purchase a perpetuity that will pay you and...

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5. You are willing to pay $15,625 now to purchase a perpetuity that will pay you and your heirs $1250 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity?

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Financial Markets and Institutions

ISBN: 978-0321280299

5th edition

Authors: Frederic S. Mishkin, Stanley G. Eakins

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