British government 5.0% perpetuities pay £5.0 interest at the end of each year forever. Another bond, 3.5% perpetuities, pays £3.50 a year forever.
a. What is the value of 5.0% perpetuities if the long-term interest rate is 7.0%? (Round your answer to 2 decimal places.)
Perpetuity value £
b. What is the value of 3.50% perpetuities? (Round your answer to 2 decimal places.)
Perpetuity value £