<u>800</u> he price of a consol that pays $120 annually if the next payment occurs one year from today.
<h3>
Explanation </h3>
Price = C/r
Here, C or constant payment = $120
and, r or opportunity cost = 15%
So, Price = 120/(15/100) ...{percent/100}
= 800
<h3>
What is constant payment?</h3>
The amount paid annually to settle or service a debt in relation to the total loan amount is known as the mortgage constant. The annual amount of cash required to service a mortgage debt can be calculated with the aid of the mortgage constant.
The annual proportion of money paid to service debt divided by the total loan amount is known as a mortgage constant. Since the outcome is expressed as a percentage, it shows what portion of the entire debt is repaid annually. Borrowers can estimate their annual mortgage payment using the mortgage constant. Since a lower mortgage constant would result in a lower annual debt servicing expense, the borrower would prefer it.
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