A perpetuity of $5,000 per year beginning today is said to offer a 15 percent interest rate.What is its present value?
A)$33,333.33
B)$37,681.16
C)$38,333.33
D)$65,217.39 PV = $5,000 +

Question

Quizplus · Accepted Answer

The present value of a perpetuity due (beginning today) is calculated as PV = C + C/r, where C is the cash flow and r is the interest rate. Here, PV = $5,000 + $5,000/0.15 = $38,333.33.

A Perpetuity of $5,000 Per Year Beginning Today Is Said