Perpetual Life Corp. has issued consol bonds with coupon payments of $75. (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 7.5%, at what price were they sold to the public?
Price sold to the public
b. If the required return today is 12%, at what price do the consols sell?
Current price