RatedrillPerpetuity
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A foundation wants to fund a scholarship that pays $500 at the end of every year, forever. If the fund earns 3.25% per year, how much must it set aside today?
What this problem teaches
The formula: PV = C / r. Check: $15,384.62 × 3.25% = $500.00 of interest a year, which pays the scholarship and leaves the principal untouched.
A hint if you get stuck
A level perpetuity is worth PV = C / r.
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