How much would you pay for the perpetual bond which pays

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Reference no: EM13395105

1. How much would you pay for a perpetual bond that pays an annual coupon of $80 per year and yields on competing instruments are 5%?.

2. If competing yields are expected to change to 15%, what is the current yield on this same bond assuming that you paid $1,600?

3. If you sell this bond in exactly one year, having paid $1,600, and received exactly one coupon payment, what is your total return if competing yields are 15%?

Reference no: EM13395105

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