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Issuing perpetual bonds called consols

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After the Napoleonic Wars, the British government restructured its debt by issuing perpetual bonds called consols. These bonds pay a periodic coupon and have no maturity, so the face value is never reimbursed. (a) Calculate the price of such a bond, assuming that the face value is GBP1000, the annual coupon rate is 2% (annual payments) and the appropriate discount rate is 11%. Assume that the first coupon will be paid in one year from now.

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Reference no: EM132390641

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