At what rate of interest will the present value of a perpetuity of ₹1000 payable at the end of every 6 months be ₹ 20,000? Option 1: 10% per annum Option 2: 15% per annum Option 3: 20% per annum Option 4: 12% per annum

Answer: 10% per annum. Solution: For a perpetuity, present value =R/i where i is the rate per payment period. Here 20000=1000/i, so i=0.05 per half-year. Doubling for the annual figure gives 10% per annum.

Statistics & Applications

Financial Math

Medium

applied

At what rate of interest will the present value of a perpetuity of ₹1000 payable at the end of every 6 months be ₹ 20,000?

10% per annum

15% per annum

20% per annum

12% per annum

✅ Correct Option: 1

For a perpetuity, present value $=\frac{R}{i}$ where $i$ is the rate per payment period. Here $20000=\frac{1000}{i}$ , so $i=0.05$ per half-year. Doubling for the annual figure gives $10\%$ per annum.

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Which of the following are correct?

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(B) Sinking fund is set-up for a particular upcoming expense.

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Choose the correct answer from the options given below:

At what rate of interest will the present value of a perpetuity of ₹1000 payable at the end of every 6 months be ₹ 20,000?

Solution

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