Perpetual Life Corp. has issued consol bonds with coupon payments of $60. (Consols pay interest forever and

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?

b. If the required return today is 10%, at what price do the consols sell?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...