The rate of interest (per annum), at which the present value of a perpetuity of ₹5,000 payable at the end of every 6 months will be ₹40,000 is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 25%
The present value of a perpetuity:
$PV=\frac{\text{Perpetual Payment}}{\text{Interest Rate (r)}}$
$40,000=\frac{5,000}{\text{r(semi-annual)}}=0.125=12.5\%$
∴ Annual Interest Rate
$=2×12.5\%=25\%$