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Kylie would like to purchase a perpetuity paying 400 per year, with the first payment due...

Kylie would like to purchase a perpetuity paying 400 per year, with the first payment due at the end of year 14. The following 2 purchase options are equivalent using an effective annual valuation interest rate of i

. • Option 1: Paying 75 at the end of each year for 13 years.

• Option 2: Paying K at the end of the year for the first five years (and paying nothing after that).

Calculate K.

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