Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
You have decided to endow Dar Al-Ataa for house developments
You have decided to endow Dar Al-Ataa for house developments. How much money must you deposit into the endowment account today if your charity pays OMR 33,000 per year forever (first payment one year from today) and is invested at a rate that pays out 4.50% per year forever? Select one: O a OMR 722,222.22 O b. OMR 360,000.00 O c. OMR 572,727.27 Od. OMR 438,461.54 e. OMR 733,333.33
Expert Solution
Perpetuity pays equal amount of payment with periodic interval for indefinite time.
Formula for calculation of Present value of perpetuity
Value of a perpetuity = C/ r
Where,
Value of a perpetuity is the sum of the present values of its expected future cash flows at the time (t=0) =?
Annual payments C = OMR 33,000
Interest rate r = 4.5% per year
Therefore,
Value of a perpetuity = OMR 33,000/4.6%
= OMR 33,000/0.0045
= OMR 733,333.33
Therefore correct answer is option e. OMR 733,333.33
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
