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To further examine the relationship between interest rates and the price of financial assets, consider the niece of a change in an investor?s required return,
To further examine the relationship between interest rates and the price of financial assets, consider the niece of a change in an investor?s required return, or opportunity cost, on the price of a financial asset. Four years ago, Zachary purchased a perpetuity that agrees to pay him and his heirs $150 per month forever. At the time of purchase, Zachary was expecting to earn an annual return of 6.00%, but in the intervening years, the economy and the available investment alternatives have changed. In today's market, it is now reasonable to anticipate an annual return of 3.60%. By how much would you expect the value of Zachary's perpetuity to change from when he purchased it until today? $1,667 $50,000 $20,000 $.30,000
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