Question

you find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2019 and the bonds have a par value of $2,000.

Company (Ticker)	Coupon	Maturity	Last Price	Last Yield	EST $ Vol (000’s)
Xenon, Inc. (XIC)	5.900	Jan 15, 2028	94.233	??	57,367
Kenny Corp. (KCC)	7.170	Jan 15, 2025	??	6.12	48,946
Williams Co. (WICO)	??	Jan 15, 2031	96.785	6.37	43,807

What is the coupon rate for the Williams Co. bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Here, we need to find the coupon rate of the bond. The dollar price of the bond is:

Dollar price = 96.785% × $1,000

Dollar price = $967.85

Now, what we need to do is to set up the bond pricing equation and solve for the coupon payment as follows:

P = $967.85 = C(PVIFA_3.185%,24) + $1,000(PVIF_3.185%,24)

Solving for the coupon payment, we get:

C = $29.91

And the coupon rate is the coupon rate divided by par value, so:

Coupon rate = 29.91 / $1,000

Coupon rate = 0.02991 or 29.91%