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26-03-2020
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A growing perpetuity is currently valued $6,225.81. The next annuity payment will be $386 and the discount rate is 9 percent. What is the annuity's rate of growth

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anthonynguyen3006 anthonynguyen3006

30-03-2020

Answer:

2.8%

Explanation:

The formula to calculate value of a perpetuity is as follow:

V = Annuity payment in year 1 / (r-g)

V: Value of the perpetuity

r: Discount rate

g: Growth rate (missing value)

By inputting numbers into the formula, we have:

6225.81 = 386 / (0.09 - g)

--> g = 2.8%

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