Question

You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2016. The bonds have a par value of $2,000.

Company (Ticker)	Coupon	Maturity	Last Price	Last Yield	EST $ Vol (000’s)
Xenon, Inc. (XIC)	6.500	Jan 15, 2031	94.293	??	57,373
Kenny Corp. (KCC)	7.230	Jan 15, 2028	??	6.24	48,952
Williams Co. (WICO)	??	Jan 15, 2034	96.845	6.49	43,813

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.)

Coupon rate             %

Answer 1

Williams Co.:

Par Value = $2,000

Current Price = 96.845% * $2,000
Current Price = $1,936.90

Annual YTM = 6.49%
Semiannual YTM = 3.245%

Time to Maturity = 18 years
Semiannual Period = 36

Let Semiannual Coupon be $C

$1,936.90 = $C * PVIFA(3.245%, 36) + $2,000 * PVIF(3.245%, 36)
$1,936.90 = $C * (1 - (1/1.03245)^36) / 0.03245 + $2,000 * (1/1.03245)^36
$1,936.90 = $C * 21.055507 + $2,000 * 0.316749
$1,936.90 = $C * 21.055507 + $633.498
$1,303.402 = $C * 21.055507
$C = $61.90

Semiannual Coupon = $61.90

Annual Coupon = 2 * Semiannual Coupon
Annual Coupon = 2 * $61.90
Annual Coupon = $123.80

Coupon Rate = Annual Coupon / Par Value
Coupon Rate = $123.80 / $2,000
Coupon Rate = 0.0619 or 6.19%