You have the opportunity to buy a perpetuity which pays $1,000 annually.Your required rate of return on this investment is 15 percent.You should be essentially indifferent to buying or not buying the investment if it were offered at a price of

Question

Quizplus · Accepted Answer

To find out the price of the perpetuity, we can use the formula: 
Price = Annual Payment / Required Rate of Return

In this case, the annual payment is $1,000 and the required rate of return is 15%. 
Price = $1,000 / 0.15 = $6,666.67

Therefore, if the investment is offered at a price of $6,666.67, you should be essentially indifferent to buying or not buying the investment.

Option A is too low as it gives a return of 20%. Option B provides a return of 16.7%, which is still higher than the required rate of return. Option D and E, both provide a return lower than 15%. So, the correct answer is C.

You Have the Opportunity to Buy a Perpetuity Which Pays