The Duration of a Perpetuity with a Yield of 6

question 12

Multiple Choice

The duration of a perpetuity with a yield of 6% is

• A)13.50 years.
• B)12.11 years.
• C)17.67 years.
• D)cannot be determined.
• E)none of the above.

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Definitions:

Pure Discount Loan

A loan where the borrower receives an amount less than the principal value and repays the principal amount at maturity with no additional interest.

Single Lump Sum

A one-time payment of money, opposed to a series of payments made over time. This term is often used in finance for describing investments or payouts.

Future

A financial contract obligating the buyer to purchase an asset, or the seller to sell an asset, at a predetermined future date and price.

Compounded Monthly

This term describes the process where interest earned is added to the principal, and future interest payments are calculated based on the new total, on a monthly basis.