If the Interest Rate Is R and Will Remain R

question 16

Multiple Choice

If the interest rate is r and will remain r forever, then a bond that will pay 75 dollars a year forever, starting one year from now, is worth how much today?

• A)75/(1 + r)dollars.
• B)75(1 + r)dollars.
• C)75/(1 + r + r² +.......+ r ⁿ +.......)dollars.
• D)75/r dollars.
• E)None of the above.

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Definitions:

Irrational

Not logical or reasonable; actions or thoughts that do not follow rational principles.

Reflective Judgment

The process of thinking critically about complex issues, considering multiple perspectives, and making decisions based on reasoned analysis.

Teen Years

The period in human development that occurs between childhood and adulthood, typically between ages 13 and 19.

Twenties

A term often used to describe the decade between 20 and 29 years of age, or the 1920s era known for its unique cultural and social dynamism.