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Capital Value Find the capital values of the properties in Exercise.
A castle for which annual rent of $225,000 will be paid in perpetuity; the interest rate is 6% compounded continuously.

Respuesta :

Answer:

P = $ 211,897

Step-by-step explanation:

Given data:

annual rent of $225,000

interest rate 6% = 0.06

compounded yearly = t =1 yr

total amount ic calculated as [tex]A =Pe^{rt}[/tex]

where P is capital value

plugging all value to get capital value

[tex]225000 = p e^{0.06\times 1}[/tex]

[tex]P = \frac{225000}{e^{0.06}} = 211,897[/tex]

P = $ 211,897

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