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The price of a perpetuity-immediate with annual level payments of $100 is calculated at an annual effective interest rate of 4%. Estimate the new price

The price of a perpetuity-immediate with annual level payments of $100 is calculated at an annual effective interest rate of 4%. Estimate the new price of this perpetuity if the interest rate increases to 4.2% using the first-order modified approximation.

Possible Answers

A

2375

B

2500

C

2625

D

2675

E

2700

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