What is the present value of a $700 perpetuity if the interest rate is 5%? If interest rates doubled to 10% what would its present value be? Round your answers to the nearest cent. Present value at 5%: $ Present value at 10%: $
What is the present value of a $700 perpetuity if the interest rate is 5%? If interest rates doubled to 10% what would its present value be? Round your answers to the nearest cent. Present value at 5%: $ Present value at 10%: $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:What is the present value of a $700 perpetuity if the interest rate is 5%? If interest rates doubled to 10%,
what would its present value be? Round your answers to the nearest cent.
Present value at 5%: $
Present value at 10%: $
Expert Solution
Concept:
The present value is the value of an asset or liability as of a specific date, adjusted for the time value of money. It represents the value of an asset or liability today, compared to its future value, based on a discount rate that takes into account the opportunity cost of money and the expected inflation rate.
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