What is maximum price you would pay for a perpetual annuity

Reference no: EM131482158

Question: 1. What is the maximum price you would pay for a perpetual annuity that will commence annual payment of £400 in 12 months' time if the market rate of interest is 13%?

2. Is it worth paying £40,000 for a perpetual annuity of £1,500 per annum, commencing payments in 12 months' time, if money can be invested elsewhere at 3%?

Reference no: EM131482158

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