X Katle Pairy Fruits Incorporated has a $2,400 16-year bond outstanding with a nominal yield of 17 percent (coupon equals 17% × $2,400 = $408 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. Note: 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 × $2,400 (or $120) for 16 years at 12 percent. The $120 is assumed to be an annual payment. Add this value to $2,400. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume Interest payments are annual.
X Katle Pairy Fruits Incorporated has a $2,400 16-year bond outstanding with a nominal yield of 17 percent (coupon equals 17% × $2,400 = $408 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. Note: 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 × $2,400 (or $120) for 16 years at 12 percent. The $120 is assumed to be an annual payment. Add this value to $2,400. Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume Interest payments are annual.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Katle Pairy Fruits Incorporated has a $2,400 16-year bond outstanding with a nominal yield of 17 percent (coupon equals
17% × $2,400 = $408 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.
Note: 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 × $2,400 (or $120) for 16 years at 12 percent. The $120 is assumed to be an
annual payment. Add this value to $2,400.
Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume Interest
payments are annual.
Present value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdf0593a3-2f1c-46e9-83ad-85b6f455be2f%2Fa2a22403-948b-4f9a-a0f4-9defafacb143%2F0j3dox_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Katle Pairy Fruits Incorporated has a $2,400 16-year bond outstanding with a nominal yield of 17 percent (coupon equals
17% × $2,400 = $408 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.
Note: 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 × $2,400 (or $120) for 16 years at 12 percent. The $120 is assumed to be an
annual payment. Add this value to $2,400.
Note: Do not round Intermediate calculations. Round your final answer to 2 decimal places. Assume Interest
payments are annual.
Present value
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