If the interest rate is 10%, then an asset that returns $1 a year forever is worth $1/1.1.

Name: If the interest rate is 10%, then an asset that returns $1 a year forever is worth $1/1.1.
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The correct formula to calculate the present value of a perpetuity (an asset that returns a fixed amount forever) is the annual payment divided by the interest rate. Therefore, an asset that returns $1 a year forever with an interest rate of 10% is worth $1/0.1, which equals $10, not $1/1.1.

If the Interest Rate Is 10%, Then an Asset That