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 (the price)is:
A) $80.
B) $800.
C) $1,000.
D) $8,000.

Question

Quizplus · Accepted Answer

The formula for the present value of a perpetuity is: 
PV = Payment / Required Yield 
PV = $80 / 0.10 
PV = $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