P e r petuities. British government 4 percent perpetuities pay £4 interest each year forever. 1 answer below »

P e r petuities. British government 4 percent perpetuities pay £4 interest each year forever. Another bond, 2 1 ⁄2 percent perpetuities, pays £2.50 a year forever. What is the value of 4 per- cent perpetuities, if the long-term interest rate is 6 percent? What is the value of 2 1 ⁄2 percent perpetuities?

 

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