1. Given an interest rate of 6.65 percent per year, what is the value at Year 8 of a perpetual stream of $3,400 payments that begin at Year 18? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
2. It is now December 14, 2007. Bangalore Motors, Inc. has an outstanding bond that matures on December 15, 2017. The bond has a coupon interest rate of 5% with interest paid semi-annually on December 15. The bond is rated A by Standard & Poor’s. Other bonds with an A-rating are currently yielding 7%. What is the price today of BMI’s bond per $1,000 of face value? Please show your analysis.