A perpetuity-due is purchased for 1,160 on January 1, 2000. The level annual payments are 90 and the interest rate is i% compounded annually. Immediately following the payment on January 1, 2014 the remaining future payments are sold at a yield rate of i%. The proceeds are used to purchase a 10-year annuity whose first payment will be on January 1, 2018, where semi-annual payments are made on January 1 and July 1. The interest rate for the annuity is i/2% compounded annually, and this interest rate takes effect on January 1, 2014. Find the payment amount.

HINT: Note that in the last part of this problem, payments are made semiannually, but you are given an annual effective rate (i/2% compounded annually). You must convert this annual effective rate to an equivalent nominal annual rate compounded semiannually so that the payment frequency and interest conversion frequency match in order to find the payment amount.

104

106

91

88

76