At what rate of interest will the present value of a perpetuity of ₹1,000 payable at the end of every 6 months be ₹20,000 ?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 10%
The present value of a perpetuity,
$PV=\frac{A}{r}$
$⇒20,000=\frac{1,000}{r}$
$⇒r=0.05$
∴ Annual Rate = $0.05×2=0.10=10\%$