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:

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Budget Cutbacks

Reductions in the planned spending of a government, organization, or individual, usually to align expenses with available resources or revenues.

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