A consol bond is a bond which forever pays a constant continuous coupon
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A consol bond is a bond which forever pays a constant continuous coupon

A consol bond is a bond which forever pays a constant continuous coupon. We normalize the coupon to unity, so over every interval with length dt the consol pays 1.dt. No face value is ever paid. The price C(t), at time t, of the consol is the value of this infinite stream of income, and it is obviously (why?) given by


Hint
StatisticsA consol bond, also known as a prep or perpetual bond can be defined as the fixed income security which has no maturity date. The consol bond is often considered a form of equity rather than a debt. One of the major disadvantages of the consol bonds is that these bonds are not redeemable....

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