You are to receive $75 per year indefinitely. The market rate of interest for these types of payments is 8%. The price you would pay for this stream is:

Name: You are to receive $75 per year indefinitely. The market rate of interest for these types of payments is 8%. The price you would pay for this stream is:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is a perpetuity, and the price of a perpetuity is calculated as the annual payment divided by the interest rate. Therefore, $75 / 0.08 = $937.50.

You Are to Receive $75 Per Year Indefinitely