Answer :
The value of the perpetuity if the payment is $ 125 and the rate if 7 % would be A. $ 3, 125.
How to find the value of the perpetuity ?
To calculate the value of a growing perpetuity, we can use the formula:
Value = Payment / (Interest rate - Growth rate)
In this case, the payment in year 1 is $125, the interest rate is 7% (0.07), and the growth rate per period is 3% (0.03).
Value = $125 / (0.07 - 0.03)
Value = $125 / 0.04
Value = $3,125
Therefore, the value of the growing perpetuity in this scenario is $3,125.
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