You Are Evaluating a Perpetuity

question 102

Multiple Choice

You are evaluating a perpetuity.The first payment is $100,and it arrives in one year.Each subsequent annual payment will increase by 10%.If the discount rate is 8%,what is the present value of this perpetuity?

• A) $5,500
• B) $1,000
• C) $1,250
• D) The present value is infinite

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Definitions:

Public Policy

Government policies aimed at ensuring the public's general welfare and protection.

Wrongful Action

An act or omission that infringes on the rights of others or is contrary to law.

Legal Right

An entitlement or privilege that is protected and enforced by a legal system.

Personal Property

Property that is movable; any property that is not real property; sometimes called personalty or chattel.