In the nineteenth century, the railroads issued 100-year bonds. Consider a $100 bond
Chapter 0, Problem 79(choose chapter or problem)
In the nineteenth century, the railroads issued 100-year bonds. Consider a $100 bond which paid $5 a year, starting a year after it was sold. Assume interest rates are 4% per year, compounded annually. (a) Find the present value of the bond. (b) Suppose that instead of maturing in 100 years, the bond was to have paid $5 a year forever. This time the principal, $100, is never repaid. What is the present value of the bond?
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