Assume That Market Interest Rates Are 6% and the Bondholder

question 164

Multiple Choice

Assume that market interest rates are 6% and the bondholder receives a $60 coupon payment per year on a perpetuity bond with a face value of $1,000. If market interest rates fall to 4%, the bond price

• A) falls to $500.
• B) rises to $1,400.
• C) rises to $1,500.
• D) rises to $2,000.

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