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What is the value of a perpetuity that pays $100 every 3 months forever? The interest rate quoted on an APR basis is 6%.

User Sdjuan
by
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1 Answer

3 votes

Answer:

$6,666.67

Explanation:

According to the given situation, the computation of the value of a perpetuity is shown below:-

Value of Perpetuity = Quarterly Payment ÷ Quarterly Interest Rate

Now, we will put the values into the above formula to reach the value of a perpetuity

= $100 ÷ (6% ÷ 4)

= $100 ÷ 0.0150

= $6,666.67

Therefore for computing the value of perpetuity we simply applied the above formula.

User Gregmacfarlane
by
8.4k points
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