Consider a Growing Perpetuity That Will Pay $100 in One

question 22

Multiple Choice

Consider a growing perpetuity that will pay $100 in one year.Each year after that,you will receive a payment on the anniversary of the last payment that is 6% larger than the last payment.This pattern of payments will continue forever.If the interest rate is 11%,then the value of this perpetuity is closest to:

• A)$1667.
• B)$588.
• C)$2000.
• D)$909.

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Definitions:

Behavior Modification

A therapeutic approach that seeks to change undesirable behaviors through reinforcement strategies.

Family Therapy

A form of psychotherapy that involves treating family problems by focusing on family dynamics and relationships as a way to improve psychological health.

Fundamental Assumption

A basic principle or belief that is accepted without proof and is foundational for a theoretical framework or system.

Placebo Effect

The phenomenon in which a person's symptoms can improve after receiving a treatment with no therapeutic value, due to the belief in the treatment's efficacy.