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Consol Bond

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The British government has a consol bond outstanding paying 100 per year forever. Assume the current interest rate is 4% per year.

1) What is the value of the bond immediately after a payment is made?

2) What is the value of the bond immediately before a payment is made?

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Solution Summary

The solution explains how to calculate the value of a consol bond before the interest payment and after the interest payment.

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1) What is the value of the bond immediately after a payment is made?

The value of the bond would be the present value of all the ...

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