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Old 11-20-2017, 05:37 PM
Futon Futon is offline
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Join Date: Jul 2016
Studying for FM
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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 06:34 PM..
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