Question

What constant annual cash payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of $2,500

Answer 1

$162.5

Step-by-step explanation:

Amount of perpetuity = Annual Payment / Return earned

We need to solve for Annual payment

Hence, Annual payment = Amount of Perpetuity * Return earned

=$2,500 * 6.5 %

=$162.5

The annual cash payment that you must receive is $162.5