K The present value of a perpetuity is calculated by dividing the amount of the
ID: 2819534 • Letter: K
Question
K 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. A local bank's advertising reads: "Give us $30,000 today, and we'll pay you s600 every year forever. " If you plan to live forever, what annual interest rate will you earn on your deposit? 1.60% 2.00% 1.80% 2.80% ps! 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 $45,000. This revision, which will rate earned on your deposited funds, will adjust your earned interest rate to the interest Graded Save & Continue O Type here to searchExplanation / Answer
Ans ) its can be solve by perpetuity formula
present value = annual income/annual interest rate
30000 = 600/r
r = 2%
Fill in the blank 1: decrease
Fill in the blank2 : 1.33% (600/45000)
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