Find the value of single perpetuity payment if the present value of the perpetuity
payments at t=0 years is AED 500,000 and the interest rate is R% compound per
year.[Choose R% from 8% to 12%]
A perpetuity payment is a payment received from an initial deposit and annuitized over an infinite period of time. In order for this to happen, each single payment must be equal to the interest generated from the initial deposit (assuming a constant rate of interest).
The formula is
Present value
=(payment per period)/(interest rate per period).
As an example,
If the present value (initial deposit) = 1,000,000 and the annual rate of interest is 7%, then the perpetuity payment P is given by:
P=Present value*interest rate
1,000,000=0.07
=70,000