You have a chance to purchase a perpetual security that has a stated annual payment (cash flow)of $50.However,this is an unusual security in that the payment will increase at an annual rate of 5 percent per year;this increase is designed to help you keep up with inflation.The next payment to be received (your first payment,due in 1 year)will be $52.50.If your required rate of return is 15 percent,how much should you be willing to pay for this security?
A) $350
B) $482
C) $525
D) $556
E) $610

Question

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The Answer of You have a chance to purchase a perpetual security that has a stated annual payment (cash flow)of $50.However,this is an unusual security in that the payment will increase at an annual rate of 5 percent per year;this increase is designed to help you keep up with inflation.The next payment to be received (your first payment,due in 1 year)will be $52.50.If your required rate of return is 15 percent,how much should you be willing to pay for this security?
A) $350
B) $482
C) $525
D) $556
E) $610

You Have a Chance to Purchase a Perpetual Security That