Question

Find the present value of the following perpetuity. Perpetuity Payment Made ​At: Payment Period Interest Rate...

Find the present value of the following perpetuity.

Perpetuity Payment

Made

​At:

Payment Period

Interest Rate

Conversion Period

​$370

beginning

3 months

6.2​%

monthly

The present value is $__.

​(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as​ needed.)

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Homework Answers

Answer #1

=> In this problem, we have cash cash flow of $ 370 for 3 months

month 1 month 2 month 3
$ 370 $ 370

$ 370

=> Annual interest rate is given as 6.2%, we can find the monthly interest rate by dividing it by 12

=> monthly interest rate = 0.516667%

=> For finding the present value, use the formula   

   , where C is the cash flow, r is the interest rate and t is the time period

=> For finding the present value of this, calculate the present value of each cash flow in all time period,here we have 3 time periods

=>

= 368.098158+366.206104+364.323835 = 1098.628098

=> Therefore, the Present value is $ 1098.628098

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