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Imagine that the government decided to fund its current deficit of $ 431 billion dollars by issuing a perpetuity offering a 4 % annual return.
Imagine that the government decided to fund its current deficit of$431billion dollars by issuing a perpetuity offering a4%annual return. How much would the government have to pay bondholders each year in perpetuity? Express your answer in billions of dollars.
(Hint: The$431billion is just the present value of these cash flows at a discount rate of4%.)
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