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

question 275

Multiple Choice

Suppose a perpetuity bond with a face value of $1,000 has a coupon rate of 8%. If market interest rates rise to 12%, the price of the bond:

• A) rises to $1,120.
• B) rises to $1,080.
• C) falls to $666.67.
• D) falls to $880.

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