Answer:
o find the smallest possible effective rate of interest, we can use the formula for the present value of a perpetuity:
Present Value = Cash Flow / Interest Rate
In this case, the present value is given as $6900 and the cash flow is $700 annually. Let's denote the interest rate as "r". The equation becomes:
6900 = 700 / r
To find the smallest possible effective rate of interest, we need to solve for "r". We can rearrange the equation as:
r = 700 / 6900
Simplifying this expression gives us:
r ≈ 0.10145
Therefore, the smallest possible effective rate of interest is approximately 10.1
Step-by-step explanation: