A perpetuity will make its first annual payment of $1,000 in five years time. Calculate the...
A perpetuity will make its first annual payment of $1,000 in five years time. Calculate the present value of this perpetuity using a 12% p.a. discount rate.
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$4,728.56 |
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$5,295.98 |
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$8,333.33 |
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$11,000.00 |
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Cannot be calculated because you cannot sum an infinite number of present values. |
Homework Answers
Value of perpetuity received at end of year 5 = $1000 / 0.12
= $8,333.33
present value of perpetuity = $8,333.33 / (1.12)5
present value of perpetuity = $4,728.56
Option '1' is correct
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