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Hi there,
A 30-year annuity-immediate with 2,000 payable at the end of every 6 months and a 30-year annuity-immediate with 10,000 payable at the end of every 6 years are to be replaced by a perpetuity paying R every 3 months. You are given that i(4) = .08. Find R.
I assume j is the 6 month rate= (1.02)^2-1
So first annuity has PV=2000*a angle 60 j=44906.33
The second annuity... I assume h is the 6 year rate=(1.02)^24-1
So this one has present value=10.000*a angle 5 yrs h=14908,81
I add these 2=59815.14
The perpetuity's interest rate =(1.02)^4-1
The perpetuity's PV=R*1/(i. a angle)=12.13
But R should be found as 1196.33
Where do I make the mistake?
A 30-year annuity-immediate with 2,000 payable at the end of every 6 months and a 30-year annuity-immediate with 10,000 payable at the end of every 6 years are to be replaced by a perpetuity paying R every 3 months. You are given that i(4) = .08. Find R.
I assume j is the 6 month rate= (1.02)^2-1
So first annuity has PV=2000*a angle 60 j=44906.33
The second annuity... I assume h is the 6 year rate=(1.02)^24-1
So this one has present value=10.000*a angle 5 yrs h=14908,81
I add these 2=59815.14
The perpetuity's interest rate =(1.02)^4-1
The perpetuity's PV=R*1/(i. a angle)=12.13
But R should be found as 1196.33
Where do I make the mistake?
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