Business, 24.06.2019 23:00 jadenhaslam

1. the present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i when the nominal interest rate, i, is constant. this formula gives the price of a consol -a bond paying a fixed nominal payment each year, forever. it is also a good approximation for the present discounted value of a stream of constant payments over long but not infinite periods, as long as i is constant 1.1. suppose i-1096. let $z-100, what is the present value of the consol? 12. ifi-10%, what is the expected present discounted value of a bond that pays $z over the next 10 years? 20 years? 30 years? (hint: use the formula from chapter 14, but remember to adjust for the first payment. 1.3. repeat the calculations in (1.1) and (1.2) for i-2% and 1-5%.

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1. the present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i...

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