What's the present value of a perpetuity that pays $250 per year if the appropriate interest rate is 5%?
A) $4,750
B) $5,000
C) $5,250
D) $5,513
E) $5,788

Question

Quizplus · Accepted Answer

The present value formula for a perpetuity is PV = PMT / r, where PV is the present value, PMT is the annual payment, and r is the interest rate. Plugging in the values given in the question, we get PV = 250 / 0.05 = $5,000. Therefore, the present value of the perpetuity is $5,000, which is option B.

What's the Present Value of a Perpetuity That Pays $250