What amount is received at the end of every 6 months forever, if Rs. 72,000 kept in a bank earns 8% per annum compounded half-yearly?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 2,880
A payment received forever is a perpetuity. Its present value is
\( \displaystyle P=\frac{R}{i} \)
where R is the payment per period and i the rate per period. Here payments are half-yearly, so
\( \displaystyle i=\frac{8\%}{2}=4\%=0.04\ \text{per half-year} \)
\( \displaystyle R=P\times i=72000\times 0.04=2880 \)
So Rs. 2,880 is received every 6 months.