Multiple choice

1. What is the present value of $10,000 per year perpetuity at an interest rate of 10%?  

a. $10,000 

b. $100,000 

c. $200,000 

d. None of the above 

2. You would like to have enough money saved to receive $100,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that the perpetuity payments start one year from the date of your retirement. The interest rate is 12.5%)?  

a. $1,000,000 

b. $10,000,000 

c. $800,000 

d. None of the above 

3. You would like to have enough money saved to receive $80,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that the perpetuity payments start one year from the date of your retirement. The interest rate is 8%)?  

a. $7,500,000 

b. $750,000 

Cc $1,000,000 

d. None of the above 

4. You would like to have enough money saved to receive a $50,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that the perpetuity payments starts on the day of retirement. The interest rate is 8%)?  

a. $1,000,000 

b. $675,000 

c. $625,000 

d. None of the above