A financial planner has recommended two investment plans that have the same investment  cost. Under Plan A, you will receive a perpetual payment of $20,000 annually, while under  Plan B, you will receive an annual payment of $50,000 for 10 years. Both plans will pay out  their first installment one year from today assuming that the interest rates for both plans are  equal.

What interest rate would make you indifferent to choosing between the two plans?

Answer rating: 100% (QA)

To determine the interest rate at which you would be indifferent between Plan A and Plan B we need t... View the full answer