Katie Pairy Fruits Inc. has a $1,200 13-year bond outstanding with a nominal yield of 17...

 

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Katie Pairy Fruits Inc. has a $1,200 13-year bond outstanding with a nominal yield of 17 percent (coupon equals 17% x $1,200 = $204 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Current price of the bond b. Find the present value of 5 percent * $1,200 (or $60) for 13 years at 12 percent. The $60 is assumed to be an annual payment. Add this value to $1,200. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Present value Katie Pairy Fruits Inc. has a $1,200 13-year bond outstanding with a nominal yield of 17 percent (coupon equals 17% x $1,200 = $204 per year). Assume that the current market required interest rate on similar bonds is now only 12 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Compute the current price of the bond. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Current price of the bond b. Find the present value of 5 percent * $1,200 (or $60) for 13 years at 12 percent. The $60 is assumed to be an annual payment. Add this value to $1,200. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Present value

Answer rating: 100% (QA)

a To compute the current price of the bond we can use the formula for the present value of a bond Cu... View the full answer