Question
1) Katie Pairy Fruits Inc. has a $2,100, 22-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% $2,100 = $378 per
1)
Katie Pairy Fruits Inc. has a $2,100, 22-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% $2,100 = $378 per year). Assume that the current market-required interest rate on similar bonds is now only 12 percent. UseAppendix BandAppendix Dfor 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 6 percent $2,100 (or $126) for 22 years at 12 percent. The $126 is assumed to be an annual payment. Add this value to $2,100.(Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) |
Present value | $ |
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