At 6% converted quarterly, the present value of a perpetuity of ₹900 payable at the end of each quarter is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹60000
Nominal rate $=6\%$ converted quarterly.
Rate per quarter:
$i=\frac{6}{4}\%=\frac{6}{4\cdot100}=\frac{3}{200}$
Payment each quarter $=900$.
Present value of perpetuity:
$PV=\frac{\text{payment}}{i}$
$PV=\frac{900}{\frac{3}{200}}$
$PV=900\cdot\frac{200}{3}$
$PV=60000$
Final answer: ₹60000