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    Econ 3

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    charmaine fos
    1. Explain the difference between an annuity and a perpetuity. 2. Calculate the present value of several perpetuities with given interest rates and annual payment amounts. 3. Determine the maximum annual withdrawal amount that can be sustained from an investment earning compound interest. 4. Find present values of perpetuities payable annually or semi-annually in the future. 5. Solve for the investment amount needed to fund a given perpetual annual payment.

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    Econ 3

    Uploaded by

    charmaine fos
    28 views1 page
    1. Explain the difference between an annuity and a perpetuity. 2. Calculate the present value of several perpetuities with given interest rates and annual payment amounts. 3. Determine the maximum annual withdrawal amount that can be sustained from an investment earning compound interest. 4. Find present values of perpetuities payable annually or semi-annually in the future. 5. Solve for the investment amount needed to fund a given perpetual annual payment.

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    sample problems in Engineering Economy

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    1. Explain the difference between an annuity and a perpetuity. 2. Calculate the present value of several perpetuities with given interest rates and annual payment amounts. 3. Determine the maximum annual withdrawal amount that can be sustained from an investment earning compound interest. 4. Find present values of perpetuities payable annually or semi-annually in the future. 5. Solve for the investment amount needed to fund a given perpetual annual payment.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    28 views1 page

    Econ 3

    Uploaded by

    charmaine fos
    1. Explain the difference between an annuity and a perpetuity. 2. Calculate the present value of several perpetuities with given interest rates and annual payment amounts. 3. Determine the maximum annual withdrawal amount that can be sustained from an investment earning compound interest. 4. Find present values of perpetuities payable annually or semi-annually in the future. 5. Solve for the investment amount needed to fund a given perpetual annual payment.

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    © All Rights Reserved
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    of 1

    Answer the following question. Ensure that your responses provide detailed solutions for the problem-solving items.

    1. What is the difference between Annuity and Perpetuity?

    2. If money is worth 6%, find the present value of a perpetuity of P70,000 payable at the beginning of each year.

    3. What present sum would be needed for the annual end-of-year payments of P250,000 each, if money is worth 15%.

    4. 500,000 is deposited in a savings account that pays 8% interest compounded semi-annually. Equal annual
    withdrawals are to be made from the account, beginning one year from now and continuing forever. Compute the
    maximum amount of the equal annual withdrawal.

    5. If money is worth 5% obtain the present value of a perpetuity of P4,500 payable annually when the first payment is
    due at the end of 5 years.

    6. What amount of money deposited 30 years ago at 5% interest would provide perpetual payment of P10,000 per
    year?

    7. If money is worth 9%, find the present value of a perpetuity of P120,500 payable at the beginning of each year.

    8. Find the present value of a perpetuity of P5,000 payable semi-annually if the money is worth 7% compounded
    quarterly.

    9. Find the present value in pesos of a perpetuity of P30,000 payable semi-annually if money is worth 9%
    compounded quarterly.

    10. If money is worth 7%, obtain the present value of a perpetuity of P64,500 payable annually when the first payment
    is due at the end of 5 years.

    11. Value of perpetuity of P50,000 per year (i = 15%)

    12. Ram makes an investment of P 3,000 for two years. He gets a rate of interest of 12%. Furthermore, calculate the
    future value of the investment.

    13. Radha wants to retire from her job and get hold of P 3,000/month. She wants the money to go to the future
    generation after she dies. She will earn an interest rate of 8% compounded annually. What is the total amount she
    will need to achieve the perpetuity goal?

    14. Suppose that the rate of discount is 7%. So, how much one must pay to receive 50 that grows at an annual rate of
    5%, forever?

    15. If a company is projected to make $100,000 in year 10, and the company’s cost of capital is 8%, with a long-term
    growth rate of 3%, the value of the perpetuity is?

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