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Annuities and perpetuities

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Annuities and perpetuities

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 2, 2015 at 6:59 pm #239942
    chandhini
    Member
    • Topics: 19
    • Replies: 45
    • β˜†β˜†

    Sir, could you solve the following please?

    1) What is the PV of $1000 to be received for 5 years starting from now at a discount rate of 10%.
    – Is it equal to $1000 + $1000 x DF for 4 years at 10% ?

    2) What’s the PV of $100 to be received in perpetuity starting from the beg of year 5 at a discount rate of 10%?
    – Is it equal to (100 / 0.1 )x Year 3 DF at 10% ?

    3) What’s the PV of $100 to be received in perpetuity starting from the beg of year 5, growing at 2% pa, at a discount rate of 10%?
    – Is it equal to (100/ 0.1 – 0.02) x Year 3 DF at 10% ?

    4) What’s the PV of $100 to be received at the beg of year 5 for 15 years at a discount rate of 10%?
    – Is it equal to 100 x Annuity Factor for 15 years at 10% x Year 3 DF ?

    These questions might seem a little silly, but I want to make sure that I have grasped the concepts right.
    Thanks for the help and kudos for the great job!! πŸ˜€

    April 3, 2015 at 12:33 am #239968
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54774
    • β˜†β˜†β˜†β˜†β˜†

    Q1 is correct

    Q2 is correct

    Q3 is correct

    Q4 is correct as well πŸ™‚

    April 3, 2015 at 9:49 am #240000
    chandhini
    Member
    • Topics: 19
    • Replies: 45
    • β˜†β˜†

    Haha. Thank you sir πŸ˜€

    April 4, 2015 at 6:33 am #240074
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54774
    • β˜†β˜†β˜†β˜†β˜†

    You are welcome πŸ™‚

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