QUESTION 5
A perpetuity-immediate pays 200 per year. Immediately after the fifth payment, the perpetuity is exchanged for a 25-year annuity-immediate that will pay X at the end of the first year.
Each subsequent annual payment will be 8% greater than the preceding payment. The annual effective rate of interest is 8%.
Calculate X and the future value of that 25-year annuity-immediate
a. 103 and 17,521
b. 108 and 18,521
c. 108 and 17,121
d. 103 and 18,121
e. 105 and 19,121