If the Cash equivalent of a perpetuity of ₹450 payable at the end of each quarter is ₹20,000, then the rate of interest convertible quarterly is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 9%
$\text{Present value of perpetuity} = \frac{R}{i}$
$20000 = \frac{450}{i}$
$i = \frac{450}{20000} = 0.0225$
$\text{Quarterly rate} = 2.25\%$
$\text{Nominal rate convertible quarterly} = 4 \times 2.25\% = 9\%$
$\text{Rate of interest} = 9\% \text{ p.a. convertible quarterly}$