Question

What is the present value of a $100 perpetuity if the interest rate is 10%? Round your answer to the nearest cent.

Answer 1

The correct answer is $1,000

Step-by-step explanation:

According to the scenario, Given data are as follows :

Cash flow = $100

Interest rate = 10%

So, present value can be calculated by following method:

Present value = Cash Flow / Interest Rate

Present value = $100 / 10%

Present value = $100 / 0.1

Present value = $1,000

Hence, the correct answer is $1000.