The U.K Treasury announced it will offer a new bond to the market place and you have been asked to estimate its worth. The bond will make a total of 50 payments of 50, but these payments occur every three-years (i.e., this bond makes its last payment in 150 years), and there is no face value. The way the bond works is that the payments dont actually go to the owner of the bond. Rather these payments go into a secret government controlled account that earns 7% per year. At maturity, the owner of the bond simply turns in the bond to get the balance of the secret account. What price should you recommend as a fair price given you think the market will require a 10% annual rate of return on this bond.

Solution: 3.51