Current market required interest rate on similar bonds

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Katie Pairy Fruits Inc. has a $1,400, 15-year bond outstanding with a nominal yield of 15 percent (coupon equals 15% × $1,400 = $210 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.) b. Find the present value of 3 percent × $1,400 (or $42) for 15 years at 12 percent. The $42 is assumed to be an annual payment. Add this value to $1,400. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume interest payments are annual.) ReferenceseBook & Resources WorksheetDifficulty: IntermediateLearning Objective: 10-03 Bond valuation is based on the process of determining the present value of interest payments plus the present value of the principal payment at maturity. Check my work Using a BA II Plus Calculator.

Reference no: EM131456543

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