If an annuity makes an infinite series of equal payments at the end of the interest periods,

Question:

If an makes an infinite series of equal payments at the end of the interest periods, it is called a If a lump sum investment of An is needed to result in n periodic payments of R when the interest rate per period is i, then

(a) Evaluate limn†’ˆž An to find a formula for the lump sum payment for a perpetuity.
(b) Find the lump sum investment needed to make payments of $100 per month in perpetuity if interest is 12%, compounded monthly.

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,... Perpetuity
Perpetuity refers to payments that are made without an end or maturity date. A perpetuity is classified as an annuity, which is something that earns a dividend or receives a payment at a regularly scheduled interval, generally yearly. So, how...