Hewitt Packing Company has an issue of $1,000 par value bonds with a 14 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield a 12 percent rate of return. The current value of each Hewitt bond is ________.

Question

Quizplus · Accepted Answer

The bond's current value is calculated using the present value of its future cash flows, which include the annual coupon payments and the par value at maturity, discounted at the current market yield of 12%. The calculation results in a value of approximately $1,113.00.

Hewitt Packing Company Has an Issue of $1,000 Par Value