Asked Nov 6, 2019

What is the present value of an investment that will pay $1,000 in one year's time, and $1,000 every year after that, when the interest rate is 8%?


Expert Answer

Step 1

Calculation of Present value of perpetuity:


The present value of the investment is $12,500

Step 2

Present value of perpetuity an annuity continuing forev...


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Anmual payments (A) Interest rate(r Present value of perpetuity=


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