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08-07-2020
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An investor purchasing a British consol is entitled to receive annual payments from the British government forever. What is the price of a consol that pays $220 annually if the next payment occurs one year from today

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andromache andromache

10-07-2020

Answer:

$5,641

Explanation:

The computation of the price of a consol is shown below:

Price of a consol is

= Payment done annually ÷ market interest rate

= $220 ÷ 3.9%

= $5,641

We simply divided the payment done annually by the market interest rate so that the price of a consol could come and the same is to be considered

Hence, the price of consol is $5,641

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