Question

At 6 % p.a., compounded quarterly, find the present value of a perpetuity of ₹ 600 payable at the end of each quarter.

Hint:

For perpetuities, use \( PV = \frac{P}{r} \), where \( r \) is the interest rate per period.

Answer 1

Step 1: The formula for the present value of a perpetuity is: \[ PV = \frac{P}{r}, \] where \( P \) is the payment per period, and \( r \) is the interest rate per period.
Step 2: Quarterly interest rate: \[ r = \frac{6}{4} \% = 0.015. \] Step 3: Substitute \( P = 600 \) and \( r = 0.015 \): \[ PV = \frac{600}{0.015} = 40,000. \]