Anmol gets a rent of Rs 100 each month for the next infinite years. Assuming rate at 12%. Find the present value.833.33338.88838.38383.33None of the above.
Question
Anmol gets a rent of Rs 100 each month for the next infinite years. Assuming rate at 12%. Find the present value.833.33338.88838.38383.33None of the above.
Solution
The present value of a perpetuity formula is used to calculate the present value of a series of cash flows that continue indefinitely. The formula for the present value of a perpetuity is cash flows per period divided by the interest rate.
In this case, the cash flow per period is Rs 100 and the interest rate is 12% or 0.12 in decimal form.
So, the present value (PV) is calculated as follows:
PV = Cash flow per period / Interest rate PV = Rs 100 / 0.12 PV = Rs 833.33
So, the present value of the rent Anmol gets each month for the next infinite years, assuming a rate of 12%, is Rs 833.33. Therefore, the answer is 833.33.
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