If the interest rate is 10 percent,how much would you pay to receive $1000 a year indefinitely?

Question

Quizplus · Accepted Answer

To find out how much you would pay to receive $1000 a year indefinitely at a 10 percent interest rate, you use the formula for the present value of a perpetuity: PV = P / r, where PV is the present value, P is the payment per period, and r is the interest rate per period. Here, P = $1000 and r = 10% or 0.10. So, PV = $1000 / 0.10 = $10,000.

If the Interest Rate Is 10 Percent,how Much Would You