The present value of a perpetuity of ₹500 payable at the end of the every 6 months is ₹10,000, then rate of interest will be :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 10%
The Present value of a perpetuity is,
$PV=\frac{C}{r}$
$⇒10,000=\frac{500}{r}$
$⇒r=0.05$ (per 6 months)
∴ Annual interest Rate = $0.05×2=10\%$