Decide to cash in the perpetuity

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Reference no: EM131495602

Earls wants to provide for his dad’s retirement and his future children; so he figures out a way to kill two birds with one stone. He sets up a perpetuity at 8.5% that will pay his dad $50,000 a year for the rest of his life. Then, when his dad dies, his children will inherit the perpetuity. The children will have the option of either cashing it in and splitting the principal, or letting it continue throughout their lifetime. If Earl’s children decide to cash in the perpetuity, how much money will they have to divide among themselves?

Reference no: EM131495602

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