Tom Cruise Lines Incorporated issued bonds five years ago at $1,000 per bond. These bonds...
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Tom Cruise Lines Incorporated issued bonds five years ago at $ per bond. These bonds had a year life when issued and the annual interest payment was then percent. This return was in line with the required returns by bondholders at that point as described below:
tableReal rate of return,Inflation premium,Risk premium,Total return,
Assume that five years later the inflation premium is only percent and is appropriately reflected in the required return for yleld to maturity of the bonds. The bonds have years remaining until maturity.
Compute the new price of the bond. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Note: Do not round intermediate calculations. Round your final answer to decimal places. Assume interest payments are annual.
New price of the bond
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