Homework Answers
Initial Bond Price = $ 3000 and Annual Interest Rates = 8 %
Let the annual perpetual payments be $ P
Now, the total present value of these perpetual annual payments, discounted at the interest rate should equal the bond's initial price so as to conform to the principles of time value of money.
Therefore, 3000 = P / 0.08
P = 3000 x 0.08 = $ 240
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