How much more money is required to fund an ordinary perpetuity than a 30-year ordinary annuity if both pay $5,000 quarterly and money can earn 5% compounded quarterly?

Ordinary Perpetuity

A perpetuity in which the payments are at the end of each payment interval.

Ordinary Annuity

A sequence of equal payments made at equal intervals of time, with the first payment occurring at the end of the period.

Compounded Quarterly

Interest calculation method where the interest is added to the principal amount every quarter, causing the interest to be calculated on the new total.

Familiarize oneself with the concept of perpetuities and their assessment techniques.
Calculate the financial worth of annuities and acknowledge the variables that influence their valuation.
Employ computational strategies of compound interest to gauge the future and present values of investments.

Verified Answer

Rosmah MoffatJun 14, 2024

Final Answer :

$309,914.24

Learning Objectives

Familiarize oneself with the concept of perpetuities and their assessment techniques.
Calculate the financial worth of annuities and acknowledge the variables that influence their valuation.
Employ computational strategies of compound interest to gauge the future and present values of investments.

How much more money is required to fund an ordinary perpetuity than a 30-year ordinary annuity if both pay $5,000 quarterly and money can earn 5% compounded quarterly?

Definitions

Learning Objectives

Learning Objectives

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