Jason Buys a Consol (Perpetual Bond)that Pays Out a Fixed

question 12

Multiple Choice

Jason buys a consol (perpetual bond) that pays out a fixed cash flow of $750,000 every year,forever,starting at the end of this year.If the current market rate is 12.5%,what is the present value of the cash flows?

• A)$6,000,000
• B)$750,000
• C)$843,750
• D)$600,000
• E)$7,500,000

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Definitions:

Pond

A small body of still water, typically smaller than a lake, formed naturally or by artificial means.

Shallow-Water

Areas of water that are not deep, often found near the shores of bodies of water, where sunlight can penetrate to the bottom, supporting various aquatic life.

Emergent Vegetation

Plants that grow in water but emerge above its surface, typically found in wetlands or shallow waters.

Stratification

The layering of sedimentary rock or soil with differing characteristics, or the arrangement of society into different social classes or castes.