Alex Buys a Consol (Perpetual Bond)for $90,000

question 23

Multiple Choice

Alex buys a consol (perpetual bond) for $90,000.This consol promises him a fixed cash flow of $10,000 every year,forever,starting at the end of the year.If the current market rate is 10%,what is the net present value of his purchase?

• A)$10,000
• B)$100,000
• C)$90,000
• D)$80,000
• E)$190,000

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Definitions:

Hereditary Influences

Genetic factors passed down from parents to offspring that impact various aspects of physical and psychological traits.

Passionately Devoted

Refers to showing or characterized by strong enthusiasm or dedication toward a particular cause or activity.

Gender

In psychology, the biologically and socially influenced characteristics by which people define male and female.

Biological

Pertaining to the study of life and living organisms, with a focus on their physical structure, chemical processes, molecular interactions, physiological mechanisms, development, and evolution.