Homework Help: economics

Posted by Rachel on Sunday, February 6, 2011 at 6:13pm.

Jerry is considering buying today a new bond which makes infinite annual payments. In particular the bond pays its holder 557.3 dollars one year from the day of purchase and the annual payment increases by 129.32 dollars each year thereafter. What is the maximum amount that Jerry should be willing to pay for this bond today given an annual interest rate of 6.91% ? (Accuracy is set at the second decimal.)

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