What Annual Payment Must You Receive in Order to Earn

question 161

Multiple Choice

What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $2,600?

• A) $190.97
• B) $143.65
• C) $163.93
• D) $148.72
• E) $169.00

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Definitions:

Interest Rate

The cost of borrowing money or the return on saved or invested money, expressed as a percentage of the principal.

Saving and Investment

The act of setting aside income for future use and allocating it to instruments expected to generate returns over time

Nominal-Wage Rigidity

The situation where nominal wages are slow to adjust to changing economic conditions, affecting employment and economic dynamics.

Classical Self-Correction Mechanism

A theory suggesting that free markets are capable of automatically adjusting to and correcting economic imbalances.