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

$90

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 price go up when interest rates fall? Why does the price go down when interest rates rise?

If the current discount rate for Canadian government bonds is

7%,

what should this bond sell for in the market?

$nothing

(Round to the nearest cent.)