If the present value of a perpetuity is $6,000 and the discount rate is 8%, how large are the payments?
A)$60,000
B)$750
C)$480
D)$1,000
E)$75,000

Question

Quizplus · Accepted Answer

The formula for the present value of a perpetuity is PV = C/r, where PV is the present value, C is the payment, and r is the discount rate. Plugging in the values given, we get:

$6,000 = C/0.08

Solving for C, we get:

C = $480

Therefore, the size of the payments is $480. Answer choice C is the correct answer.

If the Present Value of a Perpetuity Is $6,000 and the Discount