If money is worth j₄ =12%,what is the present value of a perpetuity of $1000 per quarter,first payment due in exactly 6 years (Answer to nearest dollar)?

Question

Quizplus · Accepted Answer

First, we need to calculate the discount rate for each quarter:

Discount rate = (1 + 12%)^(1/4) - 1 = 2.88%

Next, we need to calculate the present value of each cash flow using the perpetuity formula:

PV = Payment / Discount rate

PV = $1000 / 2.88% = $34,722.22

Finally, we need to discount the present value back to the present time (6 years prior) using the same discount rate:

PV = $34,722.22 / (1 + 2.88%)^(4*6)

PV = $16,889.76 ≈ $16,890

Therefore, the answer is Choice C, $16,890.

If Money Is Worth J4 =12%,what Is the Present Value

If Money Is Worth J₄ =12%,what Is the Present Value