FIN 3403: Business Finance Module 1\ You have two perpetuities, with the same yearly cash flows and the same risk (i.e., the same discount rate). However, the first perpetuity has its payments starting at Year 1, while the second perpetuity has its payments starting at year 21. Also, the first perpetuity has a value of

$1,500

when evaluated as of Year 0 .\ Now, consider a 20-year annuity (payments in Years 1-20), created as the difference between perpetuities 1 and 2 . It has a value of

$1,206.58

when evaluated as of Year 0 and using the same discount rate as applied to the perpetuities.\ Determine the discount rate that is being used to evaluate the perpetuities.

You have two perpetuities, with the same yearly cash flows and the same risk (i.e., the same discount rate). However, the first perpetuity has its payments starting at Year 1, while the second perpetuity has its payments starting at year 21. Also, the first perpetuity has a value of $1,500 when evaluated as of Year 0 . Now, consider a 20-year annuity (payments in Years 1-20), created as the difference between perpetuities 1 and 2 . It has a value of $1,206.58 when evaluated as of Year 0 and using the same discount rate as applied to the perpetuities. Determine the discount rate that is being used to evaluate the perpetuities