If the pure rate of interest is 5 percent per year,a riskless asset that guarantees to pay the owner $2,000 per year forever is worth

Name: If the pure rate of interest is 5 percent per year,a riskless asset that guarantees to pay the owner $2,000 per year forever is worth
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Quizplus · Accepted Answer

The value of a perpetuity (an asset that pays a fixed amount forever) is calculated by dividing the annual payment by the interest rate. Here, $2,000 / 0.05 = $40,000.

If the Pure Rate of Interest Is 5 Percent Per