Brain Teasers & Mental Math
A perpetuity pays $60 per year and trades at a price of $800. What discount rate is the market implying?
Model answer
7.5%.
Invert the perpetuity formula: P = C / r → r = C / P = 60 / 800.
Mental path: 60/800 = 6/80 = 3/40 = 7.5/100 = 7.5%. Or: 10% of 800 is 80, so $60 is…
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