An Admiralty Bond promises a payment of $50/year, forever. Assuming the first payment is expected one year from today and that an appropriate yield is 5%, what is a fair price for this bond? Alternatively, assume that the first payment is expected immediately. How does the price of this bond change?

Answer rating: 100% (QA)

To calculate the fair price of the Admiralty Bond we can use the concept of the present value of an ... View the full answer