What is the present value ( PV ) of a perpetuity which pays $ 100 per year , if the interest rate i = 6 % and the first payment is made at the end of year 1 ? Select one : a

Economics Nov 07, 2020

What is the present value ( PV ) of a perpetuity which pays $ 100 per year , if the interest rate i = 6 % and the first payment is made at the end of year 1 ?

Select one :

a.1284.85

b.1182.85

c.1482.45

d.1666.67

e.None of the answers is correct .

Expert Solution

ANSWER) Option d

Perpetuity annual payment (C) = $100

Interest rate (i) = 6%

Present value of the perpetuity = C/i

= 100/0.06

Present Value = $1666.67

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