Compute the current price of the bond

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Reference no: EM131456022

Katie Pairy Fruits Inc. has a $3,400, 13-year bond outstanding with a nominal yield of 15 percent (coupon equals 15% × $3,400 = $510 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 3 percent × $3,400 (or $102) for 13 years at 12 percent. The $102 is assumed to be an annual payment. Add this value to $3,400. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.)

Present Value

Reference no: EM131456022

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