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The present value of a perpetuity of Rs.100 per year at 5% per annum is
ARs.1500
BRs.2000
CRs.2500
DRs.5000
Answer & Solution
Correct answer: B. Rs.2000
1. PV of perpetuity = A / r where A is annual payment and r is rate.
2. Here A = 100 and r = 0.05.
3. PV = 100 / 0.05 = 2000.
4. So the present value of the perpetuity is Rs.2000.
_Source: ICAI BoS Foundation Paper 3, Ch 4 'Math of Finance', p.16_
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