What Is the Present Value of an Indefinite Annual Payment

question 34

Multiple Choice

What is the present value of an indefinite annual payment of £20, where the discount rate is 10 per cent?

• A) £200
• B) £220
• C) £22
• D) £181.82

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Definitions:

Interest Earned

The income received from investing in interest-bearing financial instruments, such as bonds, loans, or savings accounts.

Balance Sheet

An accounting record that presents the total value of a corporation's assets, its obligations, and the equity belonging to shareholders, reflecting the company’s financial state at a specific time.

Prepaid Expense

An expense that has been paid in advance and is considered an asset until it is actually used or consumed.

Rental Payments

Rental payments are periodic payments made by a lessee to a lessor for the use of a property, equipment, or vehicle.