Question

Mo will receive a perpetuity of $29,000 per year forever, while Curly will receive the same...

Mo will receive a perpetuity of $29,000 per year forever, while Curly will receive the same annual payment for the next 50 years. If the interest rate is 7.3 percent, how much more are Mo's payments worth?

Multiple Choice

  • $10,991.58

  • $11,357.97

  • $11,724.36

  • $12,310.58

  • $10,442.01

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Homework Answers

Answer #1

MO

Present value = Amount / Rate

Present value = $29000/7.3%

Present value = $397,260.27

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Curly:

Present value $385,535.92

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Difference amount = $397,260.27 - $385,535.92

Difference amount = $11,724.36

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