Doug, a former high school student of Techno High School and now a successful business owner,...

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Doug, a former high school student of Techno High School and now a successful business owner, wishes to set up a perpetuity of $4000 per year to be paid to a deserving student from his former school. The perpetuity is to be paid at the start of the year in one single payment, commencing from the start of the second year. A financial institution has agreed to maintain an account for this perpetuity paying a fixed rate of 5.6% p.a. compounded monthly. Find the amount, to the nearest dollar, that Doug must deposit initially in order to maintain this perpetuity. Justify your answer. 12 Doug, a former high school student of Techno High School and now a successful business owner, wishes to set up a perpetuity of $4000 per year to be paid to a deserving student from his former school. The perpetuity is to be paid at the start of the year in one single payment, commencing from the start of the second year. A financial institution has agreed to maintain an account for this perpetuity paying a fixed rate of 5.6% p.a. compounded monthly. Find the amount, to the nearest dollar, that Doug must deposit initially in order to maintain this perpetuity. Justify your answer. 12

Answer rating: 100% (QA)

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