Katie Pairy Fruits Inc. has a $1,100 12-year bond outstanding with a nominal yield of 16...
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Katie Pairy Fruits Inc. has a $1,100 12-year bond outstanding with a nominal yield of 16 percent (coupon equals 16% × $1,100 = $176 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 4 percent x $1,100 (or $44) for 12 years at 12 percent. The $44 is assumed to be an annual payment. Add this value to $1,100. (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 $1,100 12-year bond outstanding with a nominal yield of 16 percent (coupon equals 16% × $1,100 = $176 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 4 percent x $1,100 (or $44) for 12 years at 12 percent. The $44 is assumed to be an annual payment. Add this value to $1,100. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) Present value
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Answer a Price of the bond could be calculated using below formula ... View the full answer
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
Posted Date:
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