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

Finance Dec 26, 2020

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%?

Expert Solution

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

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote