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Suppose a Perpetuity Bond with a Face Value of $1,000

Question 232

Multiple Choice

Suppose a perpetuity bond with a face value of $1,000 has a coupon rate of 8%. If market interest rates rise to 12%, the price of the bond

A) falls to $666.67.
B) falls to $880.
C) rises to $1,080.
D) rises to $1,120.

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