need some help resolivng the above problem Average: 7 Attempts 9. Perpetuities A
ID: 2741879 • Letter: N
Question
need some help resolivng the above problem
Average: 7 Attempts 9. Perpetuities Aa Aa Perpetuities are also called annuities with an extended, or unlimited, life. Based on your understanding of perpetuities, answer the following questions Which of the following are characteristics of a perpetuity? Check all that apply. A perpetuity is a series of regularly timed, equal cash flows that is assumed to continue indefinitely into the future The present value of a perpetuity is calculated by dividing the amount of the payment by the investor's opportunity interest rate. The principal amount of a perpetuity is repaid as a lump-sum amount. L In a perpetuity, returns n the form of a series of identical cash flows are earned A local bank's advertising reads: "Give us $50,000 today, and we'll pay you $200 every year forever." If you plan to live forever, what annual interest rate will you earn on your deposit? O 0.48% O 0.64% O 0.40% 0.36% oops! When you went in to make your deposit, the bank representative said the amount of required deposit reported in the advertisement was incorrect and should have read $75,000. This revision, which will the interest rate earned on your deposited funds, will adjust your earned interest rate toExplanation / Answer
Answer a,b,d
It is a problem asking the discount rate at which the present value of the perpetuity will be calculated.
Present value of perpetuity =Cash flow /Discount rate
50,000=200/r
R=.40 %
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