The present value of a sequence of payments of ₹1,200 made at the end of every 6 months and continuing forever, if money is worth 6% per annum compounded semi-annually, is :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹40,000
Periodic Payment = Rs. 1,200
Interest Rate Per Annum = 6%
Since compounding is semi-annual,
$\frac{6\%}{2}=3\%=0.03$
$⇒PV=\frac{1200}{0.03}=Rs.40,000$