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Making the assumption of no compounding interest, Presume you purchase a perpetuity bond from Lateralus Inc. for $4,000 with an annual coupon rate of three percent. Specify all answers to the nearest dollar, and assume a discount rate equal to that of the current interest rate. What is the yearly return on your $4,000 investment? Changes in the economy push interest rates up from 3% to 5%. For how much can you sell your bond following this change in market interest rates? Presume that interest rates instead change from 3% to 1%. For what price will you be able to sell your bond following this change in market interest rates?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91225007

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