What is the price of a $1,000 perpetual par bond with a coupon rate of 10 percent and a current yield of 8 percent?

Name: What is the price of a $1,000 perpetual par bond with a coupon rate of 10 percent and a current yield of 8 percent?
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Quizplus · Accepted Answer

The price of a perpetual bond is calculated by dividing the annual coupon payment by the current yield. The annual coupon payment is $1,000 * 10% = $100. The current yield is 8%, so the price is $100 / 0.08 = $1,250.

What Is the Price of a $1,000 Perpetual Par Bond