Answer:
Present value of perpetuity is $12,242.27
Explanation:
Nominal rate is compounded monthly so the effected rate will be different due to monthly compounding effect.
Effective annual rate is calculated as follows
EAR = [ ( 1 + r )^n ] - 1
EAR = [ ( 1 + 0.0775/12 )^12 ] - 1
EAR = [ ( 1.0775 )^12 ] - 1
EAR = 7.76%
Present value of perpetuity = Cash flow / discount rate
Present value of perpetuity = $950 / 7.76%
Present value of perpetuity = $950 / 0.0776
Present value of perpetuity = 12,242.27
