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 $50 in interest each year (at the end of the year) but never return the principal The current discount rate for Canadian government bonds is 6 5 What...

at 65 50 0065 76923 at 45 50 0045 111111 at 85 50 0085 58824 The price rises ...

The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest

Question:

The Canadian Government has once again decided to issue a consol (a bond with a never-ending interest payment and no date). The bond will pay $50 in interest each year (at the end of the year) but never return the principal. The current for Canadian government bonds is 6.5%. What should this bond sell for in the market? What if the interest rate should fall to 4.5%? Rise to 8.5%? Why does the price go up when interest rates fall? Why does the price go down when interest rates rise?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...