Assume a Consol, That Is, a Bond Without Maturity Date

question 45

Multiple Choice

Assume a consol, that is, a bond without maturity date that pays $800 for each year you own it.What is the current price of this consol, if the market interest rate is i = 8%?

• A)$10,000
• B)$6,400
• C)$4,000
• D)$1,000
• E)the price would depend on how long you plan to own this consol

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Definitions:

Consumption

refers to the total amount of goods and services bought and used by households and individuals.

Savings Rate

The portion of disposable income not spent on consumption of goods and services but saved or invested, usually expressed as a percentage of disposable income.

Consumption

Consumption refers to the use of goods and services by households for personal satisfaction or living standards.

Credit Availability

Refers to the ease with which individuals or businesses can obtain loans or credit from financial institutions.