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Homework answers / question archive / What is the present value of a perpetuity that will pay $450 per year with the first payment occurring at year eleven if the appropriate interest rate is 8
What is the present value of a perpetuity that will pay $450 per year with the first payment occurring at year eleven if the appropriate interest rate is 8.5%?
Answer?:
Given: PMT = 450, i = 8.5%
FORMULA:
Present value of perpetuity = PMT/i
Where PMT is the annual payment & i is the instrest rate or discount rate.
PV of perpetuity = 450/8.5%
PV of perpetuity = 450/0.085
PV = 5294.12
Hence, PV of perpetuity = $5294.12