annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $1,250?
A)$77.19
B)$81.25
C)$85.31
D)$89.58
E)$94.06

Question

Quizplus · Accepted Answer

The formula for the present value of a perpetuity is PV = payment / interest rate. Rearranging this formula, we get payment = PV x interest rate. Plugging in the given information, PV = $1,250 and interest rate = 6.5% = 0.065. Therefore, payment = $1,250 x 0.065 = $81.25, which is the closest answer choice.

Annual Payment Must You Receive in Order to Earn a 6.5