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# Bond Pricing

If someone pays you 1 cent every day for the rest of eternity, is that worth infinity dollars?

Find the single percentage discount which is equivalent to a discount of 20% followed by a 30% discount.

If your answer is 10%, enter 10.

You own a bond that will pay 10% per year for the next 10 years, on a principal of $1000. The prevailing discount rate is 10% throughout.

What is the bond worth now?

The **discount rate** is the interest rate that is used in discounted cash flow analysis.

A 5 year, 5% coupon $1000 treasury bond yielding 5% is currently trading for $995. What trade would you want to execute?

Note: Ignore transaction costs and interest rates.

Assume that \( r > g \).

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