Question

You will pay $7,000 now to purchase a perpetuity which will pay you and your heirs $340 at the end of each year, forever. What is the rate of return on this perpetuity?

Answer 1

4.86%

Step-by-step explanation:

Interest rate of a perpetuity = amount / present value

$340 / $7,000 = 0.048571 = 4.86%

Answer 2

4.86%

Step-by-step explanation:

Interest rate of a perpetuity = amount / present value

$340 / $7,000 = 0.048571 = 4.86%

I hope my answer helps you