Suppose that you are receiving an annual payment of $183.00, which will continue indefinitely. The present...

Suppose that you are receiving an annual payment of $183.00, which will continue indefinitely. The present value of this payment is $915.00. What must the interest rate be? Give your answer to two decimals.

Solutions

Expert Solution

As the payment is to to continue for infinite time so it's a perpetuity.

We know for a perpetuity :-

So, Using the above formula

So, Interest rate is 0.20 or 20%

Rahul Sunny answered 1 year ago

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