a practice question about perpetuity in section time value of money

Hey @chen2196

You can use A = 2000*12 = 24000 as A, but your r then has to be 6% rather than 6%/12.

The answer uses monthly payments because r = 6%/12 = monthly discount rate. They can also use annual payments to calculate the same number as long as the discount rate is annual.

So PV = Annual payments / Annual discount rate = Monthly payments / Monthly discount rate

= £24,000 / 0.06 = £2,000 / 0.005

= £400,000

Hope that helps!