What is the present value of $10,000 per year in perpetuity at an annual interest rate of 10 percent? Assume the perpetuity starts in one year.
A)$10,000
B)$100,000
C)$200,000
D)$1,000

Question

Quizplus · Accepted Answer

To calculate the present value of a perpetuity, we can use the formula PV = PMT/i, where PV is the present value, PMT is the constant payment made every period, and i is the interest rate. Plugging in the values given in the problem, we get PV = $10,000/0.1 = $100,000. Therefore, the present value of a perpetuity of $10,000 per year at an annual interest rate of 10 percent is $100,000. Option B is the correct answer.

What Is the Present Value of $10,000 Per Year in Perpetuity