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:

Price Increase

A rise in the cost of goods or services compared to previous prices.

Price Elasticity of Demand

Determining how a change in a product's price affects the demand for that product.

Krispy Kreme Doughnut

A brand known for its signature glazed doughnuts and other sweet treats, operating worldwide.

Daily Sales

The total volume or value of products and services sold within a single business day.