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At an interest rate of 10%, what is the present value of an asset that produces $1,000 a year in perpetuity?

Question

At an interest rate of 10%, what is the present value of an asset that produces $1,000 a year in perpetuity?

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Step 1

Suppose that you own a perpetual asset that promises to pay you $1000 a year with a 10% return is . Using this information, we can determine the present value for this perpetuity.
Present Value of a Perpetuity = Annual Payment ÷ Discount Rate

Step 2

Present Value of a Perpetuity = Annual Payment ÷ Discount ...

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