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What is the present value of a perpetuity with an annual year-end payment of $1,500 and expected annual rate of return equal to 12 percent?
  • a)
    $14,000
  • b)
    $13,500
  • c)
    $11,400
  • d)
    $12,500
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
What is the present value of a perpetuity with an annual year-end paym...
Correct Answer :- d
Explanation : Present value of perpetuity = Annual payment ÷ Discount Rate 
=> $1500 ÷ 0.12 
= $12500
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Most Upvoted Answer
What is the present value of a perpetuity with an annual year-end paym...
Present Value of Perpetuity:

A perpetuity is a stream of equal cash flows that continues indefinitely. The present value of a perpetuity can be calculated using the following formula:

Present Value = Annual Payment / Discount Rate

Where,
Annual Payment = $1,500
Discount Rate = 12%

Calculation:

Using the formula, we can calculate the present value of the perpetuity as follows:

Present Value = $1,500 / 0.12
Present Value = $12,500

Therefore, the present value of the perpetuity with an annual year-end payment of $1,500 and an expected annual rate of return equal to 12 percent is $12,500. The correct answer is option D.
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What is the present value of a perpetuity with an annual year-end paym...
Present value of perpetuity = Annual payment ÷ Discount Rate => $1500 ÷ 0.12 = $12500
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What is the present value of a perpetuity with an annual year-end payment of $1,500 andexpected annual rate of return equal to 12 percent?a)$14,000b)$13,500c)$11,400d)$12,500Correct answer is option 'D'. Can you explain this answer?
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