a)After: PV = 200/0.12 = 1666.67
b)Before : PV = 200 + 200/0.12 = 1867.67
9. The British government has a consol bond outstanding paying £200 per year forever. Assume the...
14) b) The British government has consol bonds (perpetuities) outstanding that pay £100 per year, forever. Assume that the current discount rate is 4%. What is the value of the bond today in £, if the last payment was made yesterday? What is the value of the bond today in £, if you will receive the first payment today? Assume an ordinary perpetuity. If this consol trades in the market today at £2,480, what rate of return will an investor...
8) The British government has consol bonds (perpetuities) outstanding that pay £100 per year forever. Assume that the current discount rate is 4% a) What is the value of the bond today in £? b) If this consol trades in the market today at £2,480, what rate of return will an investor earn from this investment? 9) The Elysian Trust has set up a program that provides free school education for underprivileged children in India and Nepal. The Elysian...
What is the value of a British consol that pays £50 per year forever if the relevant interest rate is 5 percent? The next payment is in one year. (Do not round intermediate calculations and round your final answer to the nearest £.)
Perpetuities. The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $80 in interest each year (at the end of the year), but it will never return the principal. The current discount rate for Canadian government bonds is 9%. What should this consol bond sell for in the market? What if the interest rate should fall to 8%? Rise to 10%? Why does the...
British government 4.8% perpetuities pay £4.8 interest at the end of each year forever. Another bond, 3.3% perpetuities, pays £3.30 a year forever. a. What is the value of 4.8% perpetuities if the long-term interest rate is 6.8%? (Round your answer to 2 decimal places.) Perpetuity value £ b. What is the value of 3.30% perpetuities? (Round your answer to 2 decimal places.) Perpetuity value £
The Canadian Government has once again decided to issue a consol (a bond with a never ending interest payment and no maturity date). The bond will pay $80 in interest each year (at the end of the year), but it will never return the principal. The current discount rate for Canadian government bonds is 7%. What should this consol bond sell for in the market?
A consol bond promises to pay $1000 each year, forever, starting next year. If the nominal interest rate is 5%, the present discounted value of this consol is A) $900.00. B) $995.00. C) $2,500.00. D) $20,000.00. E) $25,000.00.
Perpetuities. The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $50 in interest each year (at the end of the year), but it will never return the principal. The current discount rate for Canadian government bonds is 7%. What should this consol bond sell for in the market? What if the interest rate should fall to 6%? Rise to 8%? Why does the...
Perpetuities. The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no maturity date). The bond will pay $70 in interest each year (at the end of the year), but it will never return the principal. A) If the current discount rate for Canadian government bonds is 10%, what should this bond sell for in the market? B) If the current discount rate for Canadian government bands would rise to 11%?...
A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $1,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 2% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 14% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after...