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A perpetuity pays $50 per year and interest rates are 9 percent. How much would its value change if interest rates decreased to 6 percent?

Respuesta :

vlatkostojanovic

Answer:

We conclude that its value change for 277.8$.

Step-by-step explanation:

We know that a perpetuity pays $50 per year and interest rates are 9 percent.  We calculate how much would its value change if interest rates decreased to 6 percent. We know that

9%=0.09

6%=0.06

We get

\frac{50}{0.09}=555.5

\frac{50}{0.06}=833.3

Therefore, we get 833.3-555.5=277.8

We conclude that its value change for 277.8$.

The value change for $277.8.

  • The calculation is as follows:

[tex]\frac{50}{0.09}=555.5\\\\\frac{50}{0.06}=833.3[/tex]

So,

=  $833.3  - $555.5

= $277.8

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