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2 February, 09:45

A perpetuity has a PV of $34,000. If the interest rate is 6%, how much will the perpetuity pay every year

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  1. 2 February, 10:07
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    The perpetuity pays $2,040 every year.

    Explanation:

    The formula to find the present value of a perpetuity is

    present value = cash flow/interest rate

    In this question we are given the interest rate and present value and we need to find the cash flow, so we will just input these values in the formula.

    Present value = 34,000

    Interest rate = 6%

    34,000=Cash flow/0.06

    34,000*0.06 = cash flow

    Cash flow = 2,040
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