MHB Perpetuity initial step confusion

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To determine how much money needs to be invested today to support the library's expenses in perpetuity, the first step is to calculate the present value of the monthly payments of $52,000, starting in 8 years. This involves finding the future value of the library's expenses and then discounting that amount back to the present using the given interest rate of 14.4% compounded monthly. The confusion arises from not properly accounting for the time until the library opens and how to apply the perpetuity formula correctly. It's essential to clarify the initial investment needed to generate the required monthly payments indefinitely. Understanding these calculations is crucial for accurately determining the present value needed for the library's funding.
Aleckand9
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Hi, I'm a bit confused regarding what steps to take to answer the following question:

In 8 years, a new library is being opened. Expenses are estimated to be $52,000, payable at the end of each month. If all funds earn 14.4% compounded monthly, how much money needs to be invested today, to be able to support the library in perpetuity?I have no idea what the first step is. I know it's something to do with 8 years but not sure what to do with it. I tried doing N=12*1000=12000, I/Y=14.4, P/Y=12, C/Y=12, FV=0, PMT=52000, PV=X however the answer I get for PV is wrong because I feel like I'm missing the initial step.

I could be completely wrong or misinterpreted the question so any help or clarification would be amazing. Thanks.
 
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Aleckand9 said:
Hi, I'm a bit confused regarding what steps to take to answer the following question:

In 8 years, a new library is being opened. Expenses are estimated to be $52,000, payable at the end of each month. If all funds earn 14.4% compounded monthly, how much money needs to be invested today, to be able to support the library in perpetuity?I have no idea what the first step is. I know it's something to do with 8 years but not sure what to do with it. I tried doing N=12*1000=12000, I/Y=14.4, P/Y=12, C/Y=12, FV=0, PMT=52000, PV=X however the answer I get for PV is wrong because I feel like I'm missing the initial step.

I could be completely wrong or misinterpreted the question so any help or clarification would be amazing. Thanks.

Answered here: Confused on a question regarding Perpetuity
 

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