A rich relative has bequeathed you a growing perpetuity. the first payment will occur in a year and will be $ 3 comma 000$3,000.

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4 years ago

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A rich relative has bequeathed you a growing perpetuity. the first payment will occur in a year and will be $ 3 comma 000$3,000.

each year after that, you will receive a payment on the anniversary of the last payment that is nbsp 4 % 4% larger than the last payment. this pattern of payments will go on forever. assume that the interest rate is 16 %16% per year.
a. what is today's value of the bequest?
b. what is the value of the bequest immediately after the first payment is made?

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1 answer:

MAVERICK [17] · Answer 1 · 2021-11-04T15:19:50+03:00

A. For knowing today's value of the bequest we need to know the period of time.
When the first payment occure and how many payments were made.
b. Immediate value of bequest is $3,000 After one year it needto be 1.16*3,000=$3,480 Plus the second payment will be 1.04*3,000=$3,120