A $50 perpetuity paid monthly has a present value of $7500 on the date of the first payment. What is the annual effective rate of interest?
Question
Solution 1
A perpetuity is a type of annuity that pays out indefinitely. The present value of a perpetuity can be calculated using the formula:
PV = P / r
where: PV = present value of the perpetuity P = payment per period (in this case, $50 per month) r = interest rate per period
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