Recall British Consols first issued in 1700s are considered perpetuities. If a British Consol will pay 100 GBP annually starting one year from now and interest rate is 5%. Required:
a. What is this asset worth today?
b. If interest rate is always 5%, what is the asset worth 3 year from now?
c. Does the asset appreciate or depreciate in value?
d. Do you have any return if you are holding an asset that does not change in value? What is your rate of return?

a. Present value of perpetuity today = Perpetuity amount / Interest rate  = 100 / 0.05 = 2,000GBP. Thus, this asset worth 2,000GBP today

b. Value of perpetuity 3 years from now = Perpetuity amount / Rate = 100/.05 = 2000GBP. The asset worth 3 year from now is 2,000GBP.

c. Since this is a perpetuity; it neither appreciate nor depreciate in value provided the interest rate is constant.

d. There will be a return since we are getting cash-flows in a yearly basis; rate of return will be the interest rate = 5%

the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.