Question: A local bank is running the following advertisement in the
A local bank is running the following advertisement in the newspaper: “For just $1000 we will pay you $100 forever!” The fine print in the ad says that for a $1000 deposit, the bank will pay $100 every year in perpetuity, starting one year after the deposit is made. What interest rate is the bank advertising (what is the IRR of this investment)?
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