The present value (in Rs.) of a sequence of payments of Rs.8,000 made at the end of each 6 months and continued forever, if money is worth 4% per annum compounded semi annually, is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 4,00,000
$\text{Perpetuity value} = \frac{R}{i}$
$R = 8000,\quad i = \frac{4}{2}\% = 2\% = 0.02$
$\text{Present value} = \frac{8000}{0.02} = 400000$
$\text{Present value} = ₹4,00,000$