how much should be invested now (to the nearest $)to receive $ 24000 per annum in perpetuity if the annual rate of interest is 5% ?
To determine how much should be invested now to receive $24,000 per annum in perpetuity at an annual interest rate of 5%, we can use a financial formula called the present value of a perpetuity.
The formula for the present value of a perpetuity is:
Present Value = Annual Payment / Interest Rate
In this case, the annual payment is $24,000, and the interest rate is 5% (which can be expressed as 0.05).
Using the formula, we can calculate the present value:
Present Value = $24,000 / 0.05
Present Value = $480,000
Therefore, to receive $24,000 per annum in perpetuity with an annual interest rate of 5%, you would need to invest approximately $480,000.