S.O.S. Mathematics CyberBoard

I need to find the present value of a perpetuity of $50, with the first payment received at the end of the 16th year. Discount rate = 8%

this is how i have done it so far. If somebody could tell me whether I am on the right track I would be grateful.


PV = [PV of 50$ perpetuity discounted at 8%] - [PV of 50$ annuity received for 15 years

--> PV = [50/0.08] - [50(1-(1.08)^-15)/0.08]

= $197.03

thanks guys/gals!

A perpetuity means that the payment amount is simply the interest;
so enough has to be in the fund to permit this; with a $50 payment
and 8% rate, then $625 is required in fund: 625 * .08 = 50

So now you need to find the PV of the required $625; OK?

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