At 8% converted quarterly, the present value of a perpetuity of Rs. 900 payable at the end of each quarter is :
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 45,000
The rate per quarter is
\( \displaystyle i = \frac{0.08}{4} = 0.02 \)
The present value of a perpetuity of R per period is \(\frac{R}{i}\):
\( \displaystyle P = \frac{900}{0.02} = 45000 \)
So the present value is Rs. 45,000.