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For example, given an annuity and perpetuity as follows: Annuity: an initial 20 year annuity with a monthly payment of SP in the first 4
For example, given an annuity and perpetuity as follows: Annuity: an initial 20 year annuity with a monthly payment of SP in the first 4 years, a quarterly payment (guaterly) of $ 3P in the following 6 years, and $ 6P in the last 10 years. Perpetuity: a final perpetetuity with monthly payments. the monthly payment is $ 1,000 in odd years and $ 2,000) in even years. (a) Get the equation for the present value in P terms and the standard annuity notation of the Annuity points (no need to solve) (b) Get the present value of the perpetuity, if assuming the effective annual interest is 6% (c) Assume that the above perpetuity and annuity have the same present value when calculated using an annual effective interest rate of 6%. Get P! (d) Assume that the effective monthly interest varies, 5% for odd talun and 6% for even years. Calculate the PV of this perpetuity.
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