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compute the present value of a perpetuity bond that pays a monthly cash flow of $1000 at an
annual interest rate of 12 percent.
Solution
Value of perpetual bond = Perpetual payment/interest rate
Perpetual payment (Monthly) =1000
Monthly interest rate=12/12=1%
Present Value of perpetual bond =1000/0.01=$100000

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compute the present value of a perpetuity bond that pays a monthly c.pdf

  • 1. compute the present value of a perpetuity bond that pays a monthly cash flow of $1000 at an annual interest rate of 12 percent. Solution Value of perpetual bond = Perpetual payment/interest rate Perpetual payment (Monthly) =1000 Monthly interest rate=12/12=1% Present Value of perpetual bond =1000/0.01=$100000