Problem 4: You are trying to finance the purchase of a perpetuity that will pay you $1,000 per year starting exactly one year from now. You will raise part of the funds by selling a delayed perpetuity that will pay $1,000 per year and make its first payment exactly 5 years from now. Interest rates are 8.75%. After you sell the delayed perpetuity, how much additional funds will you need to complete the purchase?

value of the perpetuity you wish to buy is:
The value of the delayed perpetuity you want to sell is:	Perpetuity PVF = ____________ Lump Sum PVF = _____________ Value of delayed perpetuity = ___________________
The amount of additional funds you will need to complete the purchase is:
Based on your answers above, what is your estimate of the value of a 4 year, $1,000 annuity today? ( it would be the value of a 4 year because the first payment of the delayed perpetuity is 5 years from now.)