Question: Suppose the borrowing rate r_B = 10% rB =10% compounded annually. However, the lending rate (or equivalently, the interest rate on deposits) is only 8%

Suppose the borrowing rate r_B = 10\%

rB

=10% compounded annually. However,

the lending rate (or equivalently, the interest rate on deposits) is

only 8\%

8% compounded annually. Compute the difference between the upper

and lower bounds on the price of an perpetuity that pays \(A = 10,000\\)$ per

year.

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