Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent in

Question

Exodus Limousine Company has $1,000 par value bonds outstanding at 10 percent interest. The bonds will mature in 50 years. Use Appendix B and Appendix Dfor an approximate answer but calculate your final answer using the formula and financial calculator methods.

Compute the current price of the bonds if the percent yield to maturity is: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.)

Bond Price a. 5 percent b. 15 percent

Explanation / Answer

Case (a) YTM - 5%

P = $ 1911.01

Case (b) When YTM is 15%

P = $666.35

YTM    = {C +( (F-P)/n)}/{(F+P)/2} F = Face Value $1,000.00 n=Years of maturity 50 years C = Interest Rate 10% YTM= Yield to maturity P= Current Price

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