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Eileen buys a perpetuity-immediate with annual payments for a purchase price of X. The first payment is 1.02, the 2nd payment is 3% greater than
Eileen buys a perpetuity-immediate with annual payments for a purchase price of X. The first payment is 1.02, the 2nd payment is 3% greater than the first, the third payment is 2% greater than the second, the fourth payment is 3% greater than the third, the fifth payment is 2% greater than the fourth, and so on, with the increase in future payments alternating between 3% and 2% from the previous payments. At the purchase price of X, Eileen's effective annual interest rate is 3%. Determine X. Hint: I thought of the even-year payments and odd-year payments separately. (a) 102 (b) 103 (c) 204 (d) 205 (e) 206
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