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An investment promises to make $100 annual payments forever. If the annual interest rate is 7%,...

An investment promises to make $100 annual payments forever. If the annual interest rate is 7%, then what is the value of this investment today? Round your answer to 2 decimal places.

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Expert Solution

Information provided:

Annual payment= $100

Annual interest rate= 7%

Present value of a perpetuity= Annual payment/ Interest rate

                                                        = $100/0.07

                                                        = $1,428.57.

Therefore, the value of the investment today is $1,428.57.

In case of any query, kindly comment on the solution

jeff jeffy answered 11 months ago
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