Lesson 6
1. Lesson 6
1.10. Explore 6
Module 1: Sequences and Series
Perpetuity
In the introduction to Explore, you learned that a perpetuity is a series of regular payments that last forever, much like the $100/yr option that the man offers his grandson in the cartoon. It may seem like a no-brainer to take a perpetuity of $100/yr as opposed to a one-time offer of $1000. After all, if you collect $100/yr for more than 10 yr, you will have more than $1000.
However, you need to consider the earning power of your money. Watch Perpetuities Explained to see the impact of investing your money.
Share 3
- The video explained how to determine the value of a perpetuity. With a classmate, discuss what you learned from the video. Ask any questions about parts of the presentation that you may not have fully understood.
- Answer the question posed at the end of the video. How much is a perpetuity of $100/yr worth?
- Revisit your responses from Share 2 and the question posed in the cartoon. Which one is the better option? Do you still stand by your original response? If you have changed your mind, why? Give reasons to support your answer.
Save your work in your course folder.
Did you know that some people borrow money to invest? This investment strategy makes sense as long as the interest paid on the investment is higher than the interest owed on the loan. The profit is the difference!
Self-Check 3
Complete questions 3, 12, 14, 16, and 18 on pages 63 and 64 of the textbook. Answer