Compute the current price of the bond

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Katie Pairy Fruits Inc. has a $2,900 21-year bond outstanding with a nominal yield of 18 percent (coupon equals 18% × $2,900 = $522 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.

Problem 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.)

Problem b. Find the present value of 6 percent × $2,900 (or $174) for 21 years at 12 percent. The $174 is assumed to be an annual payment. Add this value to $2,900. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.

Reference no: EM132952569

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