economics

posted by .

Nair Inc. bought a "growing perpetuity" bond. The bond will pay 631.85 dollars at the end of year 1 and the payment will increase by 2.5 percent each year forever thereafter. Assuming the interest rate is 11.26% (forever), what is the maximum amount that Nair Inc. will be able to charge for this bond if the firm put it on sale at the end of year 33? (Accuracy is set at the first decimal.)

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Math

    The Garraty company has two bond issues outstanding. Both bonds pa $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years and Bond S a maturity of 1 year. A). What will be the value of each of these bonds when …
  2. Economics - Bonds

    The Garraty company has two bond issues outstanding. Both bonds pa $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years and Bond S a maturity of 1 year. A). What will be the value of each of these bonds when …
  3. bond valuation

    Bond valuation The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bondf L has a maturity of 15 years, and Bond S a maturity of 1 year. a. What will the value of each of …
  4. bond valuation

    Bond valuation The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bondf L has a maturity of 15 years, and Bond S a maturity of 1 year. a. What will the value of each of …
  5. Economics

    One year ago, you bought a bond for $10,000. You received interest of $400 at the end of the year, as well as your $10,000 principal. If the inflation rate over the last year was five percent, calculate the real return. Show your work
  6. economics

    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 …
  7. Finance

    A four-year TIPS bond promises a real annual coupon return of 4 percent and its face value is $1,000. While the annual inflation rate was approximately zero when the bond was first issued, the inflation rate suddenly accelerated to …
  8. Economics

    One year ago, you bought a bond for $10,000.00. You received interest of $400.00 at the end of the year, as well as your $10,000.00 principal. If the inflation rate over the last year was five percent, calculate the real return. Show …
  9. FINANCE

    7. Forecasting interest rates Assume the current interest rate on a one-year Treasury bond (1R1) is 5.50 percent, the current rate on a two-year Treasury bond (1R2) is 5.95 percent, and the current rate on a three-year Treasury bond …
  10. Finance

    First Inc. is facing a liquidity problem and needs to issue a perpetual bond that is callable only at the end of year 2. The call price is $1,000 (face value) plus an additional coupon payment. The current interest rate is 8% per year. …

More Similar Questions