If we assume a perpetuity pays $100 per year forever. What would the perpetuity be worth...

If we assume a perpetuity pays $100 per year forever. What would the perpetuity be worth if the required rate of return is 5%?

		$100
		$500
		$1,000
		$2,000

Solutions

Expert Solution

Present Value of a Perpetuity = Annual Payment / (Discount Rate or Required Rate of Return)

= $ 100 / 0.05

Present Value of a Perpetuity = $ 2,000

Therefore, Option "d" is correct.

jeff jeffy answered 1 year ago

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