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What is the present value of carol payments

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Problem - A perpetuity pays $.4 per year. Bob, Carol and Daniel take turns to receive payments from this perpetuity. Bob receives the first n payments, then Carol receives the next n payments and Daniel receives the next n payments after Carol. After Daniel receives his first n payments, the cycle repeats and Bob will receive another n payments, followed by Carol and Daniel and so on. Let / be the discount rate.

(i) Express the present value of Bob's payments in terms of A, r and n.

(ii) If it is known that (1+r) = 1.25, what is the present value of Carol's payments as a percentage of the original perpetuity?

Reference no: EM132635264

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