2 fin questions

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q1 a friend who owns a perpetuity that promises to pay $1,000 at the end of each year, forever, comes to you and offers to sell you all of the payments to be received after the 25th year for a price of $1,000. at an interest rate of 10 percent, should you pay the $1,000 today to receive payment numbers 26 and onwards? what does this suggest to you about the value of perpetual payments?



q2 define what is meant by interest rate risk. assume you are the manager of a $100 million portfolio of corporate bonds and you believe interest rates will fall. what adjustments should you make to your portfolio based on your beliefs?
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