The value of the bond immediately before a payment is made is £7500 at the nterest rate is 4% per year.
The Interest rate is the quantity a lender prices a borrower and is a percentage of the fundamental quantity loaned. The interest price on a mortgage is normally noted on an annual basis called the once-a-year percent charge.
The value of the bond immediately after the payment is made can be calculated by the following formula.
= Cash Flow per year / Interest rate
= 300 / 4%
= 300 / 0.04
= £7500
The value of the bond immediately before the payment is made can be calculated by the following formula.
= Cash Flow per year + [Cash Flow per year / Interest rate]
= 300 + [300 / 4%]
= 300 + 7500
= £7800
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