Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. an investment promises to make $100 annual payment

An investment promises to make $100 annual payments forever. If the annual interest rate is 7%,...

Free

60.1K

Verified Solution

Question

Finance

An investment promises to make $100 annual payments forever. Ifthe annual interest rate is 7%, then what is the value of thisinvestment today? Round your answer to 2 decimal places.

Answer & Explanation Solved by verified expert
4.5 Ratings (719 Votes)

Information provided:

Annual payment= $100

Annual interest rate= 7%

Present value of a perpetuity= Annual payment/ Interest rate

                                                        = $100/0.07

                                                        = $1,428.57.

Therefore, the value of the investment today is $1,428.57.

In case of any query, kindly comment on the solution
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

An investment promises to make $100 annual payments forever. Ifthe annual interest rate is 7%, then what is the value of thisinvestment today? Round your answer to 2 decimal places.

Other questions asked by students

Physics
1.2K views

The electron in a hydrogen atom starts in the n = 7 level. Determine all the...

Psychology
1.2K views

what is a brief explanation of the Milgram Study? What are the ethical issues?

Statistics
1.2K views

Perform the appropriate hypothesis test for the problem. State the hypotheses, identify the claim, compute the...

Physics
1.2K views

tration 10 A heater is designed to operate with a power of 1000 W in...

Physics
1.2K views

Two long current carrying thin wires both with current I are held by insulating threads...

Geometry
1.2K views

A rectangular prism is shown 18 in 12 in 24 in What is the surface...

Calculus
1.2K views

During the winter if the low temperature outside is a C the daily cost to...

Accounting
1.2K views

INTRODUCTION The source documents in this supplement are presented in the order they...

Accounting
1.2K views

Please help me solve this international financial management problem. Thank you! ABC Company had...

Accounting
1.2K views

Analyse the information below the answer the following questions The net book value of...

Accounting
1.2K views

The current sections of Teal Inc's balance sheets at December 31, 2024 and 2025, are...

Accounting
1.2K views

Rodriguez Company pays $325,000 for real estate plus $17,225 in closing costs. The real estate...