A Perpetuity Will Pay $1000 Per Year,starting Five Years After

question 30

Multiple Choice

A perpetuity will pay $1000 per year,starting five years after the perpetuity is purchased.What is the future value (FV) of this perpetuity,given that the interest rate is 4%?

• A)$1410
• B)$20,582
• C)$21,370
• D)$25,000
• E)There is no solution to this problem.

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Definitions:

Canadian Corporations

Companies incorporated under the laws of Canada, subject to Canadian corporate regulations and taxation.

Cash Flow To Creditors

A firm’s interest payments to creditors less net new borrowings.

Long-Term Loan

A type of financing that is paid back over an extended time frame, extending beyond one year.

Capital Gains

The gain realized when the price at which an asset or investment is sold surpasses the price it was originally bought for.