Question

Problem 6-33 Coupon Rates (LO 2] 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 94.343 Last Yield Company (Ticker) Coupon Xenon, Inc. (XIC) 7.000 Kenny Corp. (KCC) 7.280 Williams Co. (WICO) ?? ?? Maturity Jan 15, 2039 Jan 15, 2036 Jan 15, 2042 EST $ Vol (000's) 57,378 48,957 43,818 ?? 96.895 6.34 6.59 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

Par value (FV) = $2000

Number of periods (N) = 23 years x2 = 46 (2042 - 2019 = 23)

Price of bond (PV) = 96.895% *2000 = 1937.90

Periodical Rate (YTM /2) = 6.59%/2 = 3.295%

The coupon amount (PMT) can be calculated with the help of PMT function of excel

Coupon amount = PMT(Rate, N, PV, FV, Type)

= PMT(3.295%,46,-1937.90,2000,0)

= $63.26

Coupon rate = Coupon amount *2 / FV

= 63.26*2/2000

= 6.326%