Question

Charities A, B and C split level payments of X at the end of each year forever. For the first n years, two-thirds of the payment will be given to Charity A and the other one-third of the payment to Charity B. Thereafter, all payments will be directed to Charity C. If the annual effective interest rate for the perpetuity is 10%, then the proportion of the present value going to Charity C is 0.4240976184 If the present value of the inheritance is based on an annual effective interest rate of 8%, then what is the proportion of the present value
going to Charity B?

(a) 0.05-0.055
(b) 0.10-0.105
(c) 0.15-0.155
(d) 0.175-0.180
(e) 0.190-0.195

Answer 1

Point E Is correct

	Proportion of present value will be same irrespective of change in rate
1	proportion of the present value going to Charity C	0.424097618
2	Total proportion	1
	Proportion between A & B (2-1)	0.575902382
	A's share 2/3rd	0.383934921
	B's share 1/3rd	0.191967461

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