Final answer:
The Kingbird Corporation bond valuation question requires the present value calculation of future cash flows at an 11% yield, which cannot be precisely determined without more data or financial tools. However, in a similar scenario, when the market interest rates are higher than the bond's coupon rate, the bond would sell for less than its face value.
Step-by-step explanation:
The student's question pertains to the valuation of bonds when purchased at a yield different from the bond's coupon rate. When Kingbird Corporation purchased Walters Inc. bonds that have a 15% coupon rate and a maturity of 10 years, they were seeking an 11% yield. The purchase price would be calculated using the present value of the bond's future cash flows (interest payments and the principal repayment at maturity) discounted at the desired yield of 11%. Unfortunately, without additional information such as market price or financial tables showing the present value of an annuity and the present value of a lump sum, an exact price cannot be calculated here.
To answer a similar question, for example, purchasing a $10,000 ten-year bond with a 6% interest rate one year before maturity when market interest rates are 9%, we can infer that the price paid would be less than the face value (par) since the market yield of 9% is higher than the coupon rate of 6%. Assuming there's one more interest payment of $600 (6% of $10,000) and the repayment of the $10,000 face value at maturity, the present value of these cash flows should be calculated at the new yield of 9%.
A quick calculation using the present value formula would be to discount the interest payment ($600) plus the face value (paid at the end of the year, $10,000) back at the new yield of 9%. The calculation would provide the maximum price a buyer would be willing to pay for the bond, considering the market's higher interest rate environment.
However, to calculate the exact price Kingbird Corporation paid for their bond purchase, additional financial information or tools are needed.