1) A perpetuity is a bond

1) A perpetuity is a bond

1) A perpetuity is a bond that pays an amount per year forever. If a perpetuity pays $5 per year:(a) what would the annual interest rate be if an investor paid a $50 perpetuity?(b) what would be the annual interest rate if an investor paid $200? $600? Bonds are known as “fixed income” securities because the future payments that they will make to investors are fixed by the bond agreement in advance.(c) Do the interest rates of bonds and other investments that offer fixed future payments vary positively or inversely with their current prices?3) The table below gives an individual’s marginal utility schedule for good X and good Y. Suppose that X and Y are the only goods available, the price of X and the price of Y are $1 and the individual’s income is $8 per time period and is all spent.

%d bloggers like this: