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Hello, Please explain. Let’s denote the price of a nonmaturing bond(called aconsol) as Pb.

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Hello, Please explain.

Let’s denote the price of a nonmaturing bond​(called a​ consol) as Pb.  The equation that indicates this price is Pb=I/r​, where I is the annual net income the bond generates and r is the nominal market interest rate. 

a. Suppose that a bond promises the holder ​$500 per year forever. The nominal market interest rate is 4 percent.

 Calculate the​ bond’s current​ price: ​$.

​(Round your answer to the nearest whole​ dollar.)

Thank you!

 
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