The price of a perpetuity-immediate with annual level payments of $100 is calculated at an annual effective interest rate of 4%. Estimate the new price of this perpetuity if the interest rate increases to 4.2% using the first-order modified approximation.

Possible Answers

A

2375

B

2500

C

2625

D

2675

E

2700

Answer rating: 100% (QA)

Given Perpetual Annuity 100 Annual effective interest rate 4 or 004 1 Calculation of P... View the full answer