At what rate of interest will the present value of a perpetuity of Rs. 1000 payable at the end of every 6 months be Rs. 20,000?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 10% per annum
For a perpetuity, the present value is \( P=\frac{R}{i} \), where i is the rate per payment period (here, per half year).
\( \displaystyle 20000=\frac{1000}{i} \)
\( \displaystyle i=\frac{1000}{20000}=0.05 \)
That is 5% per half year, i.e. 5 × 2 = 10% per annum.
CBSE Applied Mathematics (Class XII):
Perpetuity
