The british governient has a consol bond outstanding that pays £100 in interest each year. Assuming that the current interest rate in great britain is 5% and that you will receive your first interest payment immediately upon the consol bond, then the value of the console bond is closest to; 
A £1100
B £2100
C £1000
D £2000

The value of a consol bond can be calculated using the formula:

\[
\text{Value of Consol Bond} = \frac{\text{Annual Interest Payment}}{\text{Interest Rate}}
\]

Given:
- Annual Interest Payment = £100
- Interest Rate = 5% = 0.05

Plugging in the values:

\[
\text{Value of Consol Bond} = \frac{100}{0.05} = £2000
\]

Since you receive your first interest payment immediately, this does not affect the value calculated based on the perpetual stream of payments.

Thus, the value of the consol bond is closest to **£2000 (Option D)**.

Would you like more details on this calculation or any related concepts? Here are some related questions you might consider:

1. What is a consol bond, and how does it differ from other bonds?
2. How would the value change if the interest rate increased or decreased?
3. How does receiving the first interest payment immediately affect the calculation?
4. What are the risks associated with holding a consol bond?
5. How do central bank interest rate policies influence the value of consol bonds?

**Tip:** Consol bonds, also known as perpetuities, are unique in that they provide interest payments indefinitely, making their valuation particularly sensitive to changes in interest rates.

Learn how to calculate the value of a consol bond with a £100 annual interest payment at a 5% interest rate in Great Britain. Understand the concept of perpetuities and their valuation using the present value formula. Suitable for advanced learners and financial professionals.

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