Question

Perpetual Life Corp. has issued consol bonds with coupon payments of $60. (Consols pay interest forever and never mature. They are perpetuities.) a. If the required rate of return on these bonds at the time they were issued was 6%, at what price were they sold to the public

Answer 1

the price that sold to the public is $1,000

Step-by-step explanation:

The computation is shown below:

a. The price that sold to the public is

Price = Coupon payments ÷ issued rate

= $60 ÷ 6%

= $1,000

hence, the price that sold to the public is $1,000

We simply applied the above formula so that the correct value could come

And, the same is to be considered

Simply division formula is applied