Question
4) Katie Pairy Fruits Inc. has a $3,500, 14-year bond outstanding with a nominal yield of 16 percent (coupon equals 16% $3,500 = $560 per
4)
Katie Pairy Fruits Inc. has a $3,500, 14-year bond outstanding with a nominal yield of 16 percent (coupon equals 16% $3,500 = $560 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 4 percent $3,500 (or $140) for 14 years at 12 percent. The $140 is assumed to be an annual payment. Add this value to $3,500.(Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) |
Present value | $ |
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