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Sagot :
The price of the perpetuity is $2200
What is price of the perpetuity?
The present value of a perpetuity is determined by simply dividing the amount of the regular cash flows by the discount rate. A growing perpetuity includes a growth rate that increases the cash flows received each period going forward.
Given:
coupon=$55
yield to maturity=2.5%
As, we know price of the perpetuity is determined by dividing the coupon by the yield to maturity.
So,
price=coupon/yield to maturity
price=$55/2.5%
price=$2200
Hence, the price of the perpetuity is $2200
Learn more about price of the perpetuity here:
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