Problem
Let's denote the price of a nonmaturing bond (called a consol) as Pb. The equation that indicates this price is Pb = I/r, where I is the annual net income the bond generates and r is the nominal market interest rate.
a. Suppose that a bond promises the holder $500 per year forever. If the nominal market interest rate is 5 percent, what is the bond's current price?
b. What happens to the bond's price if the market interest rate rises to 10 percent?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.