Perpetual Life Corp. has issued consol bonds with coupon payments of $40. (Consols pay interest forever and never mature. They are perpetuities.)
a. If the required rate of return on these bonds at the time they were issued was 4%, at what price were they sold to the public?
Price sold to the public $
b. If the required return today is 8%, at what price do the consols sell?
Current price $