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