Rs. 2,50,000 cash is equivalent to a perpetuity of Rs.7500 payable at the end of each quarter. Then the rate of interest is
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 12% p.a
GivenPresent value of perpetuity: $PV = 250000$
Quarterly payment: $R = 7500$
Perpetuity formula: $PV = \frac{R}{i}$, where $i$ is the interest rate per quarter
$250000 = \frac{7500}{i}$
$i = \frac{7500}{250000} = \frac{3}{100} = 0.03$
Quarterly rate $i = 3\%$
Annual nominal rate (compounded quarterly): $r = 4 \cdot 3\% = 12\%$