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The present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i when the nominal interest rate, i, is
The present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i when the nominal interest rate, i, is constant. This formula gives the price of a consol-a bond paying a fixed nominal payment each year. It is also a good approximation for the present discounted value of a stream of constant payments over long but infinite periods, as long as i is constant. Suppose that i=10%. Let $z=$200. The present value of the consol is $ (Enter your response as a whole number.) Find the expected present discounted value of each of the following bonds. (Hint: Use the formula from the chapter but remember to adjust for the first payment.) If i=10%, the expected present discounted value of a bond that pays $200 per year over the next 10 years is $ (Round your response to the nearest whole number.) If i=10%, the expected present discounted value of a bond that pays $200 per year over the next 20 years is $ (Round your response to the nearest whole number.) If i=10%, the expected present discounted value of a bond that pays $200 per year over the next 30 years is $ (Round your response to the nearest whole number.) If i=10%, the expected present discounted value of a bond that pays $200 per year over the next 50 years is $ (Round your response to the nearest whole number.)
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