Question: A perpetuity is to pay $27,000 at the end of every six months. How much less money is required to fund the perpetuity if

A perpetuity is to pay $27,000 at the end of every six

A perpetuity is to pay $27,000 at the end of every six months. How much less money is required to fund the perpetuity if the money can be invested to earn 6% compounded semiannually instead of 5% compounded semiannually? (Do not round intermediate calculations.) less money is required %24

Step by Step Solution

★★★★★

3.52 Rating (152 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To solve this question we will calculate the present value of the perpetuity at two diff... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The first of ten semiannual payments of $2200 will be made 5, years from today. What is the present value of this deferred annuity using a discount rate of 7.2% compounded semiannually? (Do not round...

A deferred annuity consists of an ordinary annuity paying $2500 semiannually for a 12-year term after a 6- year period of deferral. Calculate the deferred annuity's present value using a discount...

Marion's grandfather's will established a trust that will pay her $2900 every three months for 11 years. The first payment will be made six years from now, when she turns 19. If money is worth 7.9%...

A perpetuity due is to pay $8,000 at the end of every six months. How much more money is required to fund the perpetuity if the money can be invested to earn 3% compounded semiannually instead of...

Q1 Deposits of $94.00 are made at the end of every sixmonths for 3.5 years. What will the deposits amount to if interest is 7% compounded semi-annually? The future value is $_____ Q2 ANSWER ALL THE...

BLC Inc. is a medium-sized manufacturing company based in the UK. The company operates mainly in the London area and is based in Peterborough. At a recent board meeting, the company decided to expand...

You have decided to buy a perpetual bond. The bond makes one payment at the end of every year forever and has an interest rate of 9%. If the bond initially costs $3, 000, what is the payment every...

You invest $15,000 at 6% interest, compounded monthly, for 2 years. Use the compound interest formula to calculate the compound amount (in $) for your investment. (Round your answer to the nearest...

An endowment fund is set up with a donation of $170,000. If it earns 5.8% compounded monthly, for how long will it sustain end-of- month withdrawals of $1,700? (Include the final smaller withdrawal.)...

You need to write about Labor and Management Relations in Faith-Based Organizations Should Teachers At Faith-Based Schools And Professors At Faith-Based Universities Engage In Collective Bargaining?

CEG Ski Corporation has two main business segments: Ski boot production and wakeboard production. The wakeboard production division is currently considering purchasing the ski boots from an outside...

Wasteful usage of variable overhead costs such as indirect materials and utilitiesi.e., misplacing or spilling indirect materials or leaving machines running and doors to refrigerated areas open will...

The intName method in the "Problem Solving: Stepwise Refinement"section accepted arguments

CHALLENGE ACTIVITY 3.6.2: Ranges with gaps. Jump to level 1 Given integer ordered Cherries, output: "Small carton", if there are 20-50 cherries inclusive. "Medium carton', if there are 80-100...

Fill in the blank: The second slide of a presentation should include a statement of _____, such as: "The aim of this project was to determine the impact of reduced orders on inventory availability."...

What is the importance of Psychographics factors in consumer analysis?

you're trying to save to buy a new $204,000 ferrari. you have $54,000 today that can be invested at your bank. the bank pays 6.2 percent annual interest on its accounts. how long will it be before...

A 6-lb shell moving with a velocity ?? v0k explodes at point D into three fragments which hit the vertical wall at the points indicated. Fragments A, B, and C hit the wall 0.010 s, 0.018 s, and 0.012...

Burke Copy Center purchased a machine on January 1, 2006, for $180,000 and estimated its useful life and salvage value at ten years and $30,000, respectively. On January 1, 2011, the company added...

Ratings agencies such as Moodys and Standard & Poors rate securities to give investors an independent grading of the risks involved in financial transactions. During 2007 both Moodys and S&P reported...

Selected financial information is provided below for three major pharmaceuticals: GlaxoSmithKline (Britain), Sanofi-Aventis (France), and Pfizer U.S.). GlaxoSmithKline's numbers were taken from the...

The current (simple annualized) yield, based on the holding-period return for the most recent seven days, is reported for a money market mutual fund as 4.54%. What is the funds corresponding...

If the holding-period return on a money market mutual fund for the most recent seven days is 0.097%, what current (simple) and effective annualized yields will be quoted for the fund in the financial...

The current (simple annualized) yield on a money market mutual fund, based on the return for the most recent seven days, is 4.12%. What effective (annualized) yield will be reported for the fund?