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Tamara has an annuity due paying $1,680.00 monthly for 3 years. Kobe has a perpetuity due, also paying $1,680.00 every month. For very small values
Tamara has an annuity due paying $1,680.00 monthly for 3 years. Kobe has a perpetuity due, also paying $1,680.00 every month. For very small values of the effective rate per period r, Kobe's perpetuity is worth much more than Tamara's annuity. (Try it yourself!) For very large values of r, they are worth almost the same. So somewhere in between, there is a value of r that makes Kobe's perpetuity worth exactly 3 times as much as Tamara's annuity. Find r. (Remember to give your answer as 3.456 not 0.03456.) Answer: Certainty : OC=1 (Unsure: 67%) OC=3 (Quite sure: > 80%)
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