Kilgore Natural Gas has a $1,000 par value bond outstanding that pays 10 percent
ID: 2743305 • Letter: K
Question
Kilgore Natural Gas has a $1,000 par value bond outstanding that pays 10 percent annual interest. The current yield to maturity on such bonds in the market is 11 percent. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Compute the price of the bonds for these maturity dates: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.)
Compute the price of the bonds for these maturity dates: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.)
Explanation / Answer
Bond Price = 100*PVAF(11%,40)+1000*PVF(11%,40) 100*8.9511 +1000*0.0154 910.51 Bond Price = 100*PVAF(11%,17)+1000*PVF(11%,17) 100*7.5488+1000*0.1696 924.48 Bond Price = 100*PVAF(11%,8)+1000*PVF(11%,8) 100*5.1461+1000*0.4339 948.51
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