Question
Let's denote the price of a nonmaturing bond (called a consol) as Pb. The equation that indicates this price is Upper P Subscript b Baseline
Let's denote the price of a nonmaturing bond (called a consol) as Pb. The equation that indicates this price is Upper P Subscript b Baseline equals StartFraction Upper I Over r EndFractionPb= I r, where I is the annual net income the bond generates and r is the nominal market interest rate.
a. Suppose that a bond promises the holder $400400 per year forever. The nominal market interest rate is 44 percent. Calculate the bond's current price: $___?
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Public Finance
Authors: Laurence S. Seidman
1st Edition
0073375748, 978-0073375748
