The present value of a perpetuity of Rs. 800 payable at the end of each quarter, if money is worth 8% per annum, is :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 40,000
For a perpetuity of R paid at the end of every period, the present value is
\( \displaystyle P = \frac{R}{i} \)
where i is the rate per payment period. The payments are quarterly, so
\( \displaystyle i = \frac{8\%}{4} = 2\% = 0.02 \)
\( \displaystyle P = \frac{800}{0.02} = 40000 \)
So the present value is Rs. 40,000.
CBSE Applied Mathematics (Class XII):
Perpetuity
