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.