At what rate will the present value of a perpetuity of Rs.1000 payable at the end of each quarter be Rs.50000?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 8% p.a
$PV = \frac{C}{r}$
$PV = 50000 ,\ C = 1000$
$50000 = \frac{1000}{r}$
$r = \frac{1000}{50000} = 0.02$
$r = 2\% \text{ per quarter}$
Annual Rate = $4 \times 2\% = 8\%$