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QUESTION

Derive the formula for pricing a perpetuity: P = C / r. Derive the formula for pricing a coupon bond that pays a coupon at the end of each period.

1. Derive the formula for pricing a perpetuity: P = C / r.

2. Derive the formula for pricing a coupon bond that pays a coupon at the end of each period. What will the formula be if the coupons are paid at the beginning of each period (i.e. you receive a coupon immediately after you acquired the bond and only receive the face value when it matures).

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