A perpetuity has a PV of $32,000. If the interest rate is 10%, how much will the perpetuity pay every year?

Question

Quizplus · Accepted Answer

A perpetuity pays a constant amount every year indefinitely. The formula for the present value of a perpetuity is PV = C / r, where C is the annual payment and r is the interest rate. Rearranging the formula to solve for C gives C = PV * r. Substituting the given values, C = $32,000 * 0.10 = $3,200.

A Perpetuity Has a PV of $32,000