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Q.1 (10 marks) a. Property taxes in ICT Region are roughly 3% of the purchase price in this year and then it will grow at
Q.1 (10 marks) a. Property taxes in ICT Region are roughly 3% of the purchase price in this year and then it will grow at 2% every year forever. If you just bought a Rs.1,000,000 home, what is the PV of all the future property tax payments? Assume that the house remains worth $1,000,000 forever, property tax rates growth rate will not change, and that a 12% interest rate is used for discounting. (5 marks) b. You are interested to buy a coupon bond that pays an interest of 10% and bears a face value of Rs. 1000 and will mature in 10 years. Market is equating this bond with a perpetual bond that bears a face value of Rs. 1000 and pays an interest of 12% and is at present selling for Rs.750 per bond. Required: (5 marks) 1. What value you should place on your Coupon Bond today? 2. What will be this bond value after 1 year
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