A perpetuity for sale at $100,000 that promises a yearly payment of $5,000 has an effective yield of:

Question

Quizplus · Accepted Answer

Effective yield is the annual rate of return on an investment. In this case, the perpetuity promises a yearly payment of $5,000. Therefore, the effective yield can be calculated as follows:

Effective yield = Yearly payment / Investment amount
Effective yield = $5,000 / $100,000
Effective yield = 0.05 or 5%

Therefore, the answer is B) 5%.

A Perpetuity for Sale at $100,000 That Promises a Yearly