Question
How much would you pay for a perpetual bond that pays an annual coupon of $50 per year and yields on competing instruments are 20%?
How much would you pay for a perpetual bond that pays an annual coupon of $50 per year and yields on competing instruments are 20%? You would pay $___ (Round your response to the nearest penny.)
If competing yields are expected to change to 8%, what is the current yield on this same bond assuming that you paid $250?
The current yield is ___ (Round your response to the nearest integer.)
If you sell this bond in exactly one year, having paid $250, and received exactly one coupon payment, what is your total return if competing yields are 8%?
Your total return is ___ (Round your response to two decimal places.)
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