Consider a perpetuity that has an interest rate of 1.2% compounded monthly. However, withdrawals will be made
every three months starting three months from now. The initial amount in the account is $100,000.
(a) Find the payment amount coming every three months. [ /3 ]
(b) Show that the money does not run out. Specifically, show the balance 1 month, 2 months, and 3 months from
now. Then subtract the payment you found in (a). You should be left with the original amount. [ /2 ]
Time Balance
Today $100,000.00
1 Month
2 Months
3 Months