View Single Post
Old 11-20-2017, 04:37 PM
Futon Futon is offline
Join Date: Jul 2016
Studying for FM
Posts: 128
Default Perpetuity question

The present value of a perpetuity paying 1 every two years with first payment due immediately is 7.21 at an annual effective rate of i.
Another perpetuity paying R every three years with the first payment due at the beginning of year two has the same present value at an annual effective rate of i + 0.01.

Calculate R.
(A) 1.23
(B) 1.56
(C) 1.60
(D) 1.74
(E) 1.94

My approach:

Since the first payment is at t=2, I want the perpetuity formula to be at t=0 or t=3. I chose t=3.

What did I do wrong?

Edit: Answer is D

Last edited by Futon; 11-20-2017 at 05:34 PM..
Reply With Quote
Page generated in 0.09085 seconds with 9 queries