Your family invested in perpetuity (by paying a lump-sum) 50 years ago.The perpetuity pays $120,000 per year for infinity. What would be the current fair price for this perpetuity (that you can sell it for, if you wish), if the current interest rate is 4% with annual compounding? PERPETUITY Current Interest: Fair Value: 4% Time of payment: ? Receive (Income) Current Interest: Discount Factor: PV of Cash Flows: TOTAL PV: (Hint: the initial payment will be repaid at the end of 15 years) ANNUITY $ 1 2. How would your answer change for the previous question if it was not a perpetuity, but an annuity, with 15 more years of reccuring annual payments and the initial lump-sum payment amount of $2,000,000, which will be returned at the end? Time of payment: 4% Receive (Income): 2 1 3 2 3 4 4 5 5 6 6 7 7 *** 8 to infinity 9 10 FORMULA: ? 11 12 13 14 15