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2 November, 23:10

What is the present value of a $100 perpetuity if the interest rate is 10%? Round your answer to the nearest cent.

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  1. 3 November, 02:48
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    The correct answer is $1,000

    Explanation:

    According to the scenario, Given data are as follows:

    Cash flow = $100

    Interest rate = 10%

    So, present value can be calculated by following method:

    Present value = Cash Flow / Interest Rate

    Present value = $100 / 10%

    Present value = $100 / 0.1

    Present value = $1,000

    Hence, the correct answer is $1000.
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