easy · Principles of Finance

What is the relationship between the discount rate (r) and the present value (PV) of a perpetuity?

1. An inverse relationship; as the rate increases, the value decreases.
2. A constant relationship; changes in the rate do not affect the value.
3. A linear relationship; if the rate doubles, the value doubles.
4. A direct relationship; as the rate increases, the value increases.

Sign up free to see the explanation and track your rank →