What is the most you should pay for the perpetuity

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Reference no: EM131985024

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(1) You have a chance to buy an annuity that pays $5,000 at the beginning of each year for 5 years. You could earn 4.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

(2) You have an opportunity to purchase a perpetuity that pays $74 per year. What is the most you should pay for the perpetuity if you could earn 7.44% on your money in other investments with equal risk?

Reference no: EM131985024

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