Question

Determine the present value of perpetuity of Rs. 50,000 per month @ Rate of interest 12%
p.a. is _____________
(a) Rs. 45,00,000 (b) 50,00,000
(c) Rs. 55,00,000 (d) 60,00,000

Answer 1

Answer:

Step-by-step explanation:

Answer is b

i=(r/100)÷time

PVA=p/i

i=(12/100)÷12months=0.01

PVA=50,000/0.01=50,00,000

Answer 2

Answer:

(b) 50,00,000

Step-by-step explanation:

Since,

$\text{Perpetuity}=\frac{\text{Cash flow}}{\text{Interest rate or yield}}$

Here, Cash flow = 50,000 per month,

Annual rate = 12% = 0.12

So, monthly rate = $\frac{0.12}{12}$ = 0.01,

Hence,

$\text{Perpetuity}=\frac{ 50,000}{0.01}=5000000$

Hence, option (b) is correct.