If a perpetuity bond has an interest payment of $80 and your required yield is 10%, the most you would be willing to pay for the bond is
A) $80.
B) $800.
C) $1,000.
D) $8,000.

Question

Quizplus · Accepted Answer

The formula to calculate the price of a perpetuity bond is: Interest payment/ Required yield

Price = $80/ 10% = $800

Therefore, the most you would be willing to pay for the bond is $800.

If a Perpetuity Bond Has an Interest Payment of $80