Answer:
45.35
Step-by-step explanation:
From the above question, we are told that the annual effective rate = 10% = 0.10
Note also that payment is been made every 2 years
Hence , we apply the formula of effective interest rate for a period of 2 years.
Effective Interest rate(j) = (1 + r)² - 1
= (1 + 0.10)² - 1
= 1.10² - 1
= 1.21
= 0.21
Present value of perpetuality = t/[j × j/(1 + r)²]
Where t = time in years = 2
r = 0.10
= 2/ [0.21 × 0.21/(1 + 0.10)²
= 54.87528
Present value at time t = 0
= 54.87528(1 + r)^-2
= 54.87528(1 + 0.10) ^-2
= 54.87528(1.10)^-2
= 45.35
Therefore, the present value at time (t) is 0 = 45.35
