A Perpetuity Pays $250 Per Year and Interest Rates Are

Multiple Choice

A perpetuity pays $250 per year and interest rates are 5.5 percent. How much would its value change if interest increased to 8.5 percent? Did the value increase or decrease?

A) $1,604.27; increase
B) $1,604.27; decrease
C) $1,508.29; increase
D) $1,508.29; decrease