Question

Can someone please help with this question?

Also, attached there is an example. In the example problem I did box in yellow what I dont understand.

Question 5 QUESTION 1 pts 5. You are given a perpetuity, with annual payments as follows: EXAMPLE (1) Payments of 4 at the end of the first year and every three years thereafter. (ii) Payments of 5 at the end of the second year and every three years thereafter. (iii) Payments of 2 at the end of the third year and every three years thereafter. The interest is 7% convertible semiannually. Calculate the present value of this perpetuity. (4.a-c #22] A) 52 B) 42 C) 47 D) 57 E) 63 You are given a perpetuity, with annual payments as follows: (i) Payments of 3 at the end of the first year and every three years thereafter. (11) Payments of 4 at the end of the second year and every three years thereafter. (iii) Payments of 6 at the end of the third year and every three years thereafter. The interest is 7% convertible semiannually. Calculate the present value of this perpetuity (4.a-c #22] - + 4 5 245 2 (nominal) ;" = 7% (sean-ame] j - 3.5% (effective) i = 7.1225% (3 year ) K = 22.9255% D = 4(1-2)² + 5(1+i)' + 2 = 11.946217 PV = Pazak = 2 = 52.109 ОООО

Answer 1

Correct option is 60

Annual interest rate	7%
Semiannual Interest rate = 7%/2	3.50%
Annual Efffective rate = (1+3.5%)^2 -1	7.1225%
The effective rate for the 3-year semiannual period is (1+ 3.5%)^6 - 1 =	22.9255%
D = 3 x (1+ i)^2 + 4 x (1+i)^1 + 6
D = 3 x (1+ 7.13%)^2 + 4 x (1+7.13%)^1 + 6	13.727469
Present Value of annuity = 13.727469/22.9255%	$       59.88