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1)What is the price of a perpetuity that gives you $1 coupon annually when interest rate is 5%? price of a perpetuity = $ (round to nearest integer) 2)see additional instructions What is the price of a 20-year bond with face value $500 and a 5% coupon rate when the interest rate is 3%? price of a 20-year bond = $ (round to nearest integer)
1)What is the price of a perpetuity that gives you $1 coupon annually when interest rate is 5%? price of a perpetuity = $ (round to nearest integer)
2)see additional instructions What is the price of a 20-year bond with face value $500 and a 5% coupon rate when the interest rate is 3%? price of a 20-year bond = $ (round to nearest integer)
Expert Solution
1)
Price of the perpetuity = Annual coupon/Interest rate
=>Price of the perpetuity = $1 / 0.05 = $20
Correct Answer= $20
2)please see the attached file.
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