Find the present value of a perpetuity of Rs 500 payable at the end of each quarter, if money is worth 8% per annum.
Answer & explanation
Correct answer: option 2
The correct answer is option (2) :₹25000
Given $R= ₹500,$
$r=\frac{8}{4}\text{%}= 2\text{%}$ per quarter
$i=\frac{2}{100}=0.02$
Present value =$P=\frac{R}{i}$
$=\frac{500}{0.02}$
$=₹25000$