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4.3d Perpetuities --PVP. Tracy obtains an annuity with a promise to receive $520 in perpetuity. What...

4.3d Perpetuities --PVP. Tracy obtains an annuity with a promise to receive $520 in perpetuity. What is this investment worth if the opportunity cost is 5 percent?

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Group of answer choices

$9,603.24

$11,021.79

$10,400.00

$10,404.88

$11,002.85

Solutions

Expert Solution

Present Value of Perpetuity
PV=A/r-g
PV= Present Value
A= Annuity
r= interest rate
g= growth rate
=$520/0.05-0
=$10,400.00

Correct Answer =$10,400.00

jeff jeffy answered 2 years ago
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