What is the present value of a $600 perpetuity if the interest rate is 4%? If...

What is the present value of a $600 perpetuity if the interest rate is 4%? If interest rates doubled to 8%, what would its present value be? Round your answers to the nearest cent.

-Present value at 4%: $

-Present value at 8%: $

Solutions

Expert Solution

Present value of perpetuity=cash flow/interest rate

Option 1

At 4%, present value of perpetuity=$600/4%=$15000

Option 2

At 8%, present value of perpetuity=$600/8%=$7500

jeff jeffy answered 2 years ago

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