Watch the video on valuing bonds. It shows how to calculate a bonds value with an example of a $1,000
bond making $100 annual payments, when the interest rate is 8%. Would there be a point (length to maturity) where you would prefer to hold a perpetuity paying 0/year over a bond with a $100 payment? Stated another way: If you had two investments to choose from, one a perpetuity that pays $100/year forever, or the other, a bond that pays interest of $100/year for 30 years, then pays back the $1000 principal, which one would you choose? You can use calculations, etc . if you want, to explain your decision!
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