Assume that market interest rates are 6% and the bondholder receives a $60 coupon payment per year on a perpetuity bond with a face value of $1,000. If market interest rates fall to 4%, the bond price

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The price of a perpetuity bond is calculated by dividing the annual coupon payment by the market interest rate. Initially, at a 6% interest rate, the bond price is $60 / 0.06 = $1,000. When the interest rate falls to 4%, the new price is $60 / 0.04 = $1,500, indicating the bond price rises to $1,500.

Assume That Market Interest Rates Are 6% and the Bondholder