Delta Corporation has a bond issue outstanding with an annual coupon interest rate of 7 percent and 4 years remaining until maturity. The par value of the bond is $1,000. Determine the current value of the bond if present market conditions justify a 14 percent required rate of return. The bond pays interest annually.

The current value of the bond is $796.04

Explanation:

The current value of a bond is the present value of all the cash inflows expected from the bond in the form of an annuity of interest payments and the term end face value payment discounted by the required rate of return or market interest rates. Thus, the current price of this bond will be,

Interest payment from the bond per year = 1000 * 0.07 = $70

The present value of ordinary annuity formula is attached in the answer.

Price = 70 * [ (1 - (1+0.14)^-4) / 0.14 ]  + 1000 / (1.14)^4

Price of the bond = $796.04

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi

answer; importance to people; or acceptance;