Calculate the Present Value of a Perpetuity That Will Pay

question 18

Multiple Choice

Calculate the present value of a perpetuity that will pay out $7,500 every six months. The first payment will be made four years from now. The interest rate earned is 8.6% compounded semi-annually.

• A) $174,419
• B) $129,898
• C) $124,543
• D) $119,563
• E) $104,826

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Definitions:

Leading Object Rule

A legal principle that allows for the enforcement of oral contracts that are unenforceable under the Statute of Frauds if they are admitted to in court by the party against whom the contract is sought to be enforced.

Usage of Trade

Established customs and practices commonly observed and accepted in a particular industry or trade.

UCC

The Uniform Commercial Code, which is a comprehensive set of laws governing sales and commercial transactions in the United States, intended to harmonize the law of sales and other commercial transactions across the country.

Suretyship Provision

A contractual arrangement where a third party (surety) agrees to take responsibility for the debtor's obligations if the debtor fails to fulfill them.