Answer:
1.
$2000
2.
If the yield to maturity doubles,the price of perpetuity would reduce by 100%
Explanation:
The price of the perpetuity is determined by dividing the coupon by the yield to maturity as shown below:
price=coupon/yield to maturity
coupon=$50
yield to maturity=2.5%
price=$50/2.5%
price=$2000
If the yield to maturity doubles, it becomes 5% and a new price is shown below:
price=$50/5%=$1000
