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All questions of Perpetuity for Commerce Exam
A perpetuity pays Rs. 50 annually. If the interest rate is 8%, what is its present value?- a)Rs. 400
- b)Rs. 625
- c)Rs. 500
- d)Rs. 6250
Correct answer is option 'C'. Can you explain this answer?
A perpetuity pays Rs. 50 annually. If the interest rate is 8%, what is its present value?
a)
Rs. 400
b)
Rs. 625
c)
Rs. 500
d)
Rs. 6250
|
Sounak Chaudhary answered |
Understanding Perpetuity
A perpetuity is a financial instrument that pays a constant amount indefinitely. In this case, the perpetuity pays Rs. 50 annually.
Present Value Formula
To find the present value (PV) of a perpetuity, you can use the formula:
PV = C / r
Where:
- C = Cash flow per period (Rs. 50)
- r = Discount rate (interest rate as a decimal, so 8% becomes 0.08)
Calculation Steps
1. Identify the Cash Flow (C):
- C = Rs. 50
2. Identify the Interest Rate (r):
- r = 8% = 0.08
3. Apply the Formula:
- PV = 50 / 0.08
4. Perform the Calculation:
- PV = 50 / 0.08
- PV = 625
Final Answer
The present value of the perpetuity is Rs. 625, which corresponds to option 'b'.
Conclusion
Understanding the calculation of present value for perpetuities is crucial in finance, as it helps in making informed investment decisions. In this example, the Rs. 625 present value indicates the worth today of receiving Rs. 50 annually indefinitely at an 8% interest rate.
A perpetuity is a financial instrument that pays a constant amount indefinitely. In this case, the perpetuity pays Rs. 50 annually.
Present Value Formula
To find the present value (PV) of a perpetuity, you can use the formula:
PV = C / r
Where:
- C = Cash flow per period (Rs. 50)
- r = Discount rate (interest rate as a decimal, so 8% becomes 0.08)
Calculation Steps
1. Identify the Cash Flow (C):
- C = Rs. 50
2. Identify the Interest Rate (r):
- r = 8% = 0.08
3. Apply the Formula:
- PV = 50 / 0.08
4. Perform the Calculation:
- PV = 50 / 0.08
- PV = 625
Final Answer
The present value of the perpetuity is Rs. 625, which corresponds to option 'b'.
Conclusion
Understanding the calculation of present value for perpetuities is crucial in finance, as it helps in making informed investment decisions. In this example, the Rs. 625 present value indicates the worth today of receiving Rs. 50 annually indefinitely at an 8% interest rate.
If the present value of a perpetuity is Rs. 1000 and the annual cash flow is Rs. 40, what is the discount rate?- a)2.5%
- b)4%
- c)5%
- d)8%
Correct answer is option 'B'. Can you explain this answer?
If the present value of a perpetuity is Rs. 1000 and the annual cash flow is Rs. 40, what is the discount rate?
a)
2.5%
b)
4%
c)
5%
d)
8%
|
Nipun Tuteja answered |
Rearranging the perpetuity formula to solve for the discount rate, we get r = CF / PV = 40 / 1000 = 0.04, or 4%, expressed as a percentage.
If the present value of a perpetuity is Rs. 4000 and the annual cash flow is Rs. 200, what is the discount rate?- a)5%
- b)10%
- c)8%
- d)12%
Correct answer is option 'C'. Can you explain this answer?
If the present value of a perpetuity is Rs. 4000 and the annual cash flow is Rs. 200, what is the discount rate?
a)
5%
b)
10%
c)
8%
d)
12%
|
KP Classes answered |
Rearranging the perpetuity formula to solve for the discount rate, we get r = CF / PV = 200 / 4000 = 0.05, or 5%, expressed as a percentage.
If the present value of a perpetuity is Rs. 3000 and the annual cash flow is Rs. 150, what is the discount rate?- a)5%
- b)10%
- c)8%
- d)15%
Correct answer is option 'B'. Can you explain this answer?
If the present value of a perpetuity is Rs. 3000 and the annual cash flow is Rs. 150, what is the discount rate?
a)
5%
b)
10%
c)
8%
d)
15%
|
|
Pj Commerce Academy answered |
We use the perpetuity formula PV = CF / r, where PV is the present value, CF is the cash flow, and r is the discount rate. Rearranging the formula, we get r = CF / PV. Substituting the given values, we get r = 150 / 3000 = 0.05, or 5%, expressed as a percentage.
Which of the following statements about perpetuities is true?- a)The present value of perpetuity is finite
- b)Perpetuities have a fixed maturity date
- c)Perpetuities have a fixed coupon rate
- d)The future value of perpetuity is infinite
Correct answer is option 'D'. Can you explain this answer?
Which of the following statements about perpetuities is true?
a)
The present value of perpetuity is finite
b)
Perpetuities have a fixed maturity date
c)
Perpetuities have a fixed coupon rate
d)
The future value of perpetuity is infinite
|
|
KP Classes answered |
Perpetuities have an infinite duration, which means they continue indefinitely, leading to an infinite future value.
What is the present value of a perpetuity that pays Rs. 120 annually if the discount rate is 6%?- a)Rs. 2000
- b)Rs. 1500
- c)Rs. 1800
- d)Rs. 2200
Correct answer is option 'A'. Can you explain this answer?
What is the present value of a perpetuity that pays Rs. 120 annually if the discount rate is 6%?
a)
Rs. 2000
b)
Rs. 1500
c)
Rs. 1800
d)
Rs. 2200
|
|
Pj Commerce Academy answered |
Applying the perpetuity formula PV = CF / r, we substitute the given values: PV = 120 / 0.06 = Rs. 2000
What is the present value of a perpetuity with a cash flow of Rs. 100 per year and a discount rate of 5%?- a)Rs. 2000
- b)Rs. 5000
- c)Rs. 1500
- d)Rs. 200
Correct answer is option 'A'. Can you explain this answer?
What is the present value of a perpetuity with a cash flow of Rs. 100 per year and a discount rate of 5%?
a)
Rs. 2000
b)
Rs. 5000
c)
Rs. 1500
d)
Rs. 200
|
Curiosity Classes answered |
Applying the perpetuity formula PV = CF / r, we substitute the given values: PV = 100 / 0.05 = Rs. 2000.
A perpetuity pays Rs 60 annually. If the discount rate is 6%, what is its present value- a)Rs. 1000
- b)Rs. 1200
- c)Rs. 900
- d)Rs. 1500
Correct answer is option 'C'. Can you explain this answer?
A perpetuity pays Rs 60 annually. If the discount rate is 6%, what is its present value
a)
Rs. 1000
b)
Rs. 1200
c)
Rs. 900
d)
Rs. 1500
|
|
KP Classes answered |
Applying the perpetuity formula PV = CF / r, we substitute the given values: PV = 60 / 0.06 = Rs. 900
What is the present value of a perpetuity with a cash flow of Rs. 200 per year and a discount rate of 8%?- a)Rs. 2500
- b)Rs. 1500
- c)Rs. 25000
- d)Rs. 5000
Correct answer is option 'A'. Can you explain this answer?
What is the present value of a perpetuity with a cash flow of Rs. 200 per year and a discount rate of 8%?
a)
Rs. 2500
b)
Rs. 1500
c)
Rs. 25000
d)
Rs. 5000
|
|
Nipun Tuteja answered |
Again, using the perpetuity formula PV = CF / r, we substitute the given values: PV = 200 / 0.08 = Rs. 2500.
What is the present value of a perpetuity with a cash flow of Rs. 150 per year and a discount rate of 10%?- a)Rs. 1500
- b)Rs. 1000
- c)Rs. 2000
- d)Rs. 2500
Correct answer is option 'A'. Can you explain this answer?
What is the present value of a perpetuity with a cash flow of Rs. 150 per year and a discount rate of 10%?
a)
Rs. 1500
b)
Rs. 1000
c)
Rs. 2000
d)
Rs. 2500
|
|
Curiosity Classes answered |
Using the perpetuity formula PV = CF / r, we substitute the given values: PV = 150 / 0.10 = Rs. 1500
If the present value of a perpetuity is Rs. 2000 and the discount rate is 10%, what is the annual cash flow?- a)Rs. 100
- b)Rs. 200
- c)Rs. 250
- d)Rs. 300
Correct answer is option 'B'. Can you explain this answer?
If the present value of a perpetuity is Rs. 2000 and the discount rate is 10%, what is the annual cash flow?
a)
Rs. 100
b)
Rs. 200
c)
Rs. 250
d)
Rs. 300
|
Learning Educators answered |
Once again, rearranging the perpetuity formula to solve for the cash flow, we get CF = r * PV = 0.10 * 2000 = Rs. 200.
If the present value of a perpetuity is Rs. 5000 and the annual cash flow is Rs. 200, what is the discount rate?- a)4%
- b)5%
- c)6%
- d)8%
Correct answer is option 'B'. Can you explain this answer?
If the present value of a perpetuity is Rs. 5000 and the annual cash flow is Rs. 200, what is the discount rate?
a)
4%
b)
5%
c)
6%
d)
8%
|
|
Learning Educators answered |
Rearranging the perpetuity formula to solve for the discount rate, we get r = CF / PV = 200 / 5000 = 0.04, or 4%, expressed as a percentage.
What happens to the present value of a perpetuity when the discount rate increases?- a)Increases
- b)Decreases
- c)Remains constant
- d)Depends on the coupon rate
Correct answer is option 'B'. Can you explain this answer?
What happens to the present value of a perpetuity when the discount rate increases?
a)
Increases
b)
Decreases
c)
Remains constant
d)
Depends on the coupon rate
|
|
Nipun Tuteja answered |
As the discount rate increases, the present value of a perpetuity decreases because the discount rate is inveRs.ely proportional to the present value.
What is a perpetuity?- a)An investment with a finite duration
- b)An investment with an infinite duration
- c)An investment with variable returns
- d)An investment with fixed returns
Correct answer is option 'B'. Can you explain this answer?
What is a perpetuity?
a)
An investment with a finite duration
b)
An investment with an infinite duration
c)
An investment with variable returns
d)
An investment with fixed returns
|
|
KP Classes answered |
A perpetuity is an investment that pays a constant stream of cash flows indefinitely, with no specific end date. Therefore, it has an infinite duration.
A perpetuity pays Rs. 80 annually. If the discount rate is 4%, what is its present value?- a)Rs. 2000
- b)Rs. 1600
- c)Rs. 2400
- d)Rs. 3200
Correct answer is option 'B'. Can you explain this answer?
A perpetuity pays Rs. 80 annually. If the discount rate is 4%, what is its present value?
a)
Rs. 2000
b)
Rs. 1600
c)
Rs. 2400
d)
Rs. 3200
|
|
Nipun Tuteja answered |
Using the perpetuity formula PV = CF / r, we substitute the given values: PV = 80 / 0.04 = Rs. 1600.
Chapter doubts & questions for Perpetuity - Applied Mathematics for Class 11 2025 is part of Commerce exam preparation. The chapters have been prepared according to the Commerce exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for Commerce 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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