ookmarks People Window Help aAplia: Student Question X\\1 x 5. Introduction To T
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ookmarks People Window Help aAplia: Student Question X x 5. Introduction To The Present //courses.aplia.com/af/servlet/quiz?quiz action takeQuiz&quiz;_probGuid QNAPCOAB010100000041ca25e0110000 Graded Assignment | Read Chapter 51 Back to Due Sunday 06.17.18 at 11:45 PM Attempts: Keep the Highest:/7 Aa Aa Perpetuities are also called annuities with an extended, or unlimited, life. Based on your understanding of perpetuities, answer the following questions. Which of the following are characteristics of a perpetuity? Check all that apply. In a perpetuity, returns-in the form of a series of identical cash flows-are earned. A perpetuity continues for a fixed time period. O The present value of a perpetuity is calculated by dividing the amount of the payment by the investor's opportunity interest rate. The principal amount of a perpetuity is repaid as a lump-sum amount. A local bank's advertising reads: "Give us $35,000 today, and we'l pay you $200 every year live forever, what annual interest rate will you earn on your deposit? 0.91% 0.57% 0.51% ? 0.68% Oopsl When you went in to make your deposit, the bank representative said the amount of required d eposit reported the interest t was incorrect and should have read $52,500. This revision, which will rate earned on your deposited funds, will adjust your earned interest rate toExplanation / Answer
b) Present Value=Cash flow each year/Annual interest rate
$35000=$200/Interest rate
Interest rate=(200/35000)×100
Interest rate=0.57% i.e second option
If Present Value is $52500,then the interest rate will fall to
Interest rate=(200/52500)×100
Interest rate=0.38%
a)Following are the characteristics of perpetuity:
In a perpetuity returns in the form of series of cash flows are earned.
Perpetuity continues upto infinity.
The present value of perpetuity is calculated by dividing cash flows received by the investor with the interest rate. In case of payment the amount is divided by the opportunity interest rate.
The principal payment of perpetuity is paid in lumpsum amount.
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