question 11 (1 point)\na consol paying $20 annually when the interest rate is 5 percent has a price of…

question 11 (1 point)\na consol paying $20 annually when the interest rate is 5 percent has a price of \n\n$100\n$400\n$800\n$200

question 11 (1 point)\na consol paying $20 annually when the interest rate is 5 percent has a price of \n\n$100\n$400\n$800\n$200

Answer

Explanation:

Step1: Recall consol - price formula

The formula for the price of a consol is $P=\frac{C}{i}$, where $P$ is the price of the consol, $C$ is the annual coupon payment, and $i$ is the interest rate.

Step2: Substitute values

We are given that $C = 20$ and $i=0.05$. Substituting these values into the formula, we get $P=\frac{20}{0.05}$.

Step3: Calculate the price

$P=\frac{20}{0.05}=400$.

Answer:

B. $400$