Question of the day
2026-09-13
Brain Teasers
A perpetuity pays $50 per year forever. At a 5% discount rate, what is it worth today?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
$1,000.
PV of a perpetuity = C / r = 50 / 0.05 = $1,000.
Sanity check: $1,000 invested at 5% throws off exactly $50 a year forever — so the price is self-consistent.
Convention gotcha: the standard formula assumes the first $50 arrives one year from now. If the first payment were today, add one payment: $1,050.
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