Ms sbnda has recently won a
competetion where she has choce
between recived 5000 now or an annual
amount forever atarting now (ie a level
perpetuity starting immediately) the intrest
rate is 8% per annum what would be the
value of the annual perpetuity
I think you need to convert the formula PV = A/ r where PV is present value of the perpetuity, A – amount of periodic payment, and r is interest rate.
So from your question it is 5000 = A/0.08, then A = 5000x 0.08 = 400
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