A local bank advertises the following deal: Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever.
a. Calculate the present value of your payments to the bank if the interest rate available on other deposits is 6.75%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $
b. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate available on other deposits is 6.75%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value $
c. Is this a good deal? Yes No