A bond that pays interest forever and has no maturity is aperpetual bond. In wha

Question

A bond that pays interest forever and has no maturity is aperpetual bond. In what respect is a perpetual bond similar to ano-growth common stock? Are there preferred stocks that areevaluated similarly to perpetual bonds and other preferred stocksthat are more like bonds with finite lives? Explain.
A bond that pays interest forever and has no maturity is aperpetual bond. In what respect is a perpetual bond similar to ano-growth common stock? Are there preferred stocks that areevaluated similarly to perpetual bonds and other preferred stocksthat are more like bonds with finite lives? Explain.

Explanation / Answer

PerpetualBond:       Perpetual bond is a Non redeemable bond with no maturity date thatpays regular interest rates indefinitely. Perpetual bonds arenot redeemable buy pay a steady stream of interest forever. Since perpetual bond payments are similar to stock dividendpayments – as they both offer some sort of return for anindefinite period of time.

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