Ally wishes to leave a provision in her will that $5,000 will be paid annually in...
Ally wishes to leave a provision in her will that $5,000 will be paid annually in perpetuity to a local charity. how much must she provide in her will for this perpetuity if the interest rate is 4%?
a. $62,500
b. $125,000
c. $100,000
d. $75,000
Homework Answers
Present value of perpetuity=Annual cash flows/interest rate
=5000/0.04
which is equal to
=$125,000.
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