Answer:
The effective rate of interest per quarter is 40%.
Step-by-step explanation:
This can be calculated using the formula for calculating the Present Value of a Perpetuity as follows:
PV = A / r ........................................ (1)
Where;
PV = Present value of the series of payments = $5,000
A = Quarterly payment = $2,000
r = Quarterly effective rate of interest = ?
Substituting the values into equation (1) and solve for r, we have:
5,000 = 2000 / r
5,000 * r = 2,000
r = 2,000 / 5,000
r = 0.40, or 40%
Therefore, the effective rate of interest per quarter is 40%.
