Question

You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2019. The bonds have a par value of $2,000 and semiannual coupons. Last Price 94.183 Last Yield Company (Ticker) Coupon Maturity Xenon, Inc. (XIC) 5.400 Jan 15, 2023 Kenny Corp. (KCC) 7.125 Jan 15, 2022 Williams Co. ?? Jan 15, 2029 (WICO) EST $ Vol (000's) 57,362 48,941 43,802 5.14 6.85 ?? Ja 94.735 a. What price would you expect to pay for the Kenny Corp. bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the bond's current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Price b. Current yield

Answer 1

Bond Par Value = $2,000

Time Period = 3 years

Coupon Payment = 0.07125(0.05)(2,000) = 71.25 semi-annually

Yield = 5.14%

Calculating Bond Price,

Using TVM Calculation,

PV = [FV = 2,000, PMT = 71.25, N = 6, I = 0.0514/2]

PV = $2,109.08

Bond Price = $2,109.08

Current yield = 2(71.25)/2,109.08

Current yield = 6.76%