Katie Pairy Fruits Inc. has a $1,300 14-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% × $1,300 = $234 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.) b. Find the present value of 6 percent × $1,300 (or $78) for 14 years at 12 percent. The $78 is assumed to be an annual payment. Add this value to $1,300. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.
Katie Pairy Fruits Inc. has a $1,300 14-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% × $1,300 = $234 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.)
b. Find the
a)
Data given:
Face value=$1300
Coupon rate=18% p.a. (compounded annually)
n=14 years
Yield rate=12%
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
