3. 4. The Doug and Bob Corporation is selling a perpetual annuity contract that pays $30,000...

Transcribed Image Text:

3. 4. The Doug and Bob Corporation is selling a perpetual annuity contract that pays $30,000 per year. The contract currently states the annuity will start payments in year 10. If the going rate of return on this investment is 10%, what should we be willing to pay for the perpetual annuity today (approximately)? $139,952 $105,148 $115,663 $127,229** $300,000 c) You want to receive quarterly payments of $3000, beginning at the end of this quarter. You want to receive payments for 25 years and the cost of the annuity is $100,000. What is the APR on this investment (approximately)? a) b) e) 2.81% 6.73% 11.25%** 2.62% 10.49% 3. 4. The Doug and Bob Corporation is selling a perpetual annuity contract that pays $30,000 per year. The contract currently states the annuity will start payments in year 10. If the going rate of return on this investment is 10%, what should we be willing to pay for the perpetual annuity today (approximately)? $139,952 $105,148 $115,663 $127,229** $300,000 c) You want to receive quarterly payments of $3000, beginning at the end of this quarter. You want to receive payments for 25 years and the cost of the annuity is $100,000. What is the APR on this investment (approximately)? a) b) e) 2.81% 6.73% 11.25%** 2.62% 10.49%

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Problem 3 Solution To find the present value of the perpetual annuity we can use the form... View the full answer