Your friend promises you a perpetuity of $1 every year, which starts in year 1. However, your friend is an absent-minded guy, paying you $2 at year 10 but no payment at year 9. Except for these two years, in other years, the payment is always $1. Which of the following statements is true?

Select one: a. your friend is better off for his being absent-minded

b. you are better off for his being absent-minded

c. there is no difference for his being absent-minded

d. no enough information to make decision

e. none of the above

Bond A has a coupon rate of 9%, with a three-year maturity and a face value of $1,000. If the discount rate now or future is 9%, and you want to buy bond A now, what is the price you have to pay now (P0)?

Select one:

a. $1,000.00

b. $1,200.00

c. $1,250.00

d. cannot be decided

e. none of the above