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12 January, 00:08

Problem 5-68 Perpetuities and Effective Interest Rate (LO3) What is the value of a perpetuity that pays $100 every 3 months forever? The interest rate quoted on an APR basis is 6%.

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  1. 12 January, 02:03
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    The answer is $6666.67

    Explanation:

    Quarterly interest rate = 0.06/4 = 0.015

    PV of Perpetuity = PMT/i = 100/0.015 = $6666.67
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