Question

Capital Value Find the capital values of the properties in Exercise.

A castle for which annual rent of $225,000 will be paid in perpetuity; the interest rate is 6% compounded continuously.

Answer 1

P = $ 211,897

Explanation:

Given data:

annual rent of $225,000

interest rate 6% = 0.06

compounded yearly = t =1 yr

total amount ic calculated as
`A =Pe^(rt)`

where P is capital value

plugging all value to get capital value

`225000 = p e^(0.06* 1)`

`P = (225000)/(e^(0.06)) = 211,897`

P = $ 211,897