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Perpetuity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Perpetuity

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 15, 2019 at 3:47 am #549565
    mhdazhr
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    Cilla has a perpetuity that is due to start in two years’ time. If she received the money in a lump sum now, it would be worth $300,000.
    The interest rate is 17%.

    How much will Cilla receive each year?

    October 15, 2019 at 7:42 am #549591
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    Please do not simply set test questions and expect to be provided with a full answer. You must have an answer in the same book in which you found the question, so in future ask about whatever it is in the answer that you are not clear about and then I will explain.

    The discount factor for a perpetuity starting in 2 years time is 1/0.17 x 1/1.17 = 5.0277 (this is explained in my free lectures on discounting).

    If the receipt each year is X, then X x 5.0277 = 300,000.

    Therefore X = 300,000 / 5.0277 = 59,699 per year.

    October 15, 2019 at 6:43 pm #549677
    mhdazhr
    Participant
    • Topics: 1
    • Replies: 1
    • ☆

    Thanks for your response but sir the answer was not there. I was giving a mock exam and it was just showing that the answer i entered is incorrect it wasn’t showing me the answer. But thanks a tonn for you response.

    October 16, 2019 at 8:22 am #549717
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Perpetuity’ is closed to new replies.

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