Suppose a Perpetuity Bond with a Face Value of $1,000

question 83

Multiple Choice

Suppose a perpetuity bond with a face value of $1,000 has a 10% coupon rate. If market interest rates fall to 8%, the price of the bond:

• A) rises to $1,250.
• B) falls to $750.
• C) rises to $1,080.
• D) stays at $1,000.

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Definitions:

Depreciates

The decrease in value of an asset over time or in response to changes in market conditions.

Euro

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Real Exchange Rate

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Nominal Exchange Rate

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