Assume that you purchased a $1,000 perpetual bond that pays a market interest rate of 5 percent.If you attempted to sell this bond today subsequent to an increased market rate of interest of 7.5 percent,then you

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When market interest rates increase, the value of existing bonds decrease. Therefore, if you attempted to sell a perpetual bond that pays a fixed rate of interest of 5 percent in a market where the interest rates have gone up to 7.5 percent, you would only be able to sell it at a price lower than your initial investment, resulting in a capital loss.

Assume That You Purchased a $1,000 Perpetual Bond That Pays