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In exchange for $1000 today, the bank promises to pay you $25 per year forever (assuming you live forever). Your opportunity cost of capital is

In exchange for $1000 today, the bank promises to pay you $25 per year forever (assuming you live forever). Your opportunity cost of capital is 5% compounded annually. If the first payment from the bank is scheduled to arrive next year, what effective annual interest rate is the bank paying out on this perpetuity? From a purely financial perspective, should you give $1000 to the bank or invest your money elsewhere?

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