Suppose you paid $1,000 for a perpetuity bond that pays $40 a year forever to the bondholder. Now suppose that due to aggressive policy by the Fed, general interest rates fall from 4% to 1%. What would be the price of the bond if it continues to pay $40 per year?

Answer rating: 100% (QA)

The price of the bond would be 4000 ... View the full answer