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1.    The Canadian government has decided to issue a consol (bond with a never-ending interest

payment

and no maturity date). The bond will pay $50 in interest each year but never return the principal.

The bond will pay $50 in interest each year but never return the principal. The current discount

Rate for the Canadian govmt. Bond is 5.5%. 



§ What should this bond sell for in the market?

§ What should the bond sell for if the int. rates fall to 4.0?

§ Or rise to 8.5% 

Top Answer

(a) If the interest rate is 5.5%, this bond should sell for in the market=... View the full answer

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