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Karolina [17]
3 years ago
9

What is the present value of a $400 perpetuity if the interest rate is 7%? If interest rates doubled to 14%, what would its pres

ent value be? Round your answers to the nearest cent.
Business
1 answer:
s2008m [1.1K]3 years ago
8 0

Answer:

present value = $57.14.28

present value = $2857.13

Explanation:

given data

perpetuity value  = $400

interest rate = 7% = 0.07

interest rate = 14% = 0.14

to find out

What is the present value

solution

we get her present value that is express as

present value = \frac{perpetuity}{rate}   ............1

put here value for rate 7% and 14%

present value = \frac{400}{0.07}

present value = $57.14.28

and

present value = \frac{400}{0.14}

present value = $2857.13

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