How much more money is required to fund an ordinary perpetuity than a 25-year ordinary annuity if the funds can earn 7% compounded quarterly and both pay $500 monthly?

Ordinary Perpetuity

A series of equal cash flows that occur at the end of each period forever.

Ordinary Annuity

A series of equal payments made at the end of consecutive periods over a fixed length of time.

Compounded Quarterly

When an investment's interest is compounded quarterly, the interest is calculated and added to the principal four times a year.

Evaluate the monetary commitments and consequences associated with perpetuities in contrast to fixed-length annuities.
Utilize the theory of compounding interest on a semi-annual and quarterly basis across diverse financial contexts.
Gain insight into the influence of compounding intervals on the development of savings and investments.

Verified Answer

Final Answer :

$15,209.95

Learning Objectives

Evaluate the monetary commitments and consequences associated with perpetuities in contrast to fixed-length annuities.
Utilize the theory of compounding interest on a semi-annual and quarterly basis across diverse financial contexts.
Gain insight into the influence of compounding intervals on the development of savings and investments.