Question

To calculate the number of years until maturity, assume that it is currently January 15, 2013.

Company (Ticker)	Coupon	Maturity	Last Price	Last Yield	EST $ Vol (000’s)
Xenon, Inc. (XIC)	6.600	Jan 15, 2032	94.303	??	57,374
Kenny Corp. (KCC)	7.240	Jan 15, 2029	??	6.26	48,953
Williams Co. (WICO)	??	Jan 15, 2038	94.855	7.08	43,814

Requirement 1:

What price would you expect to pay for the Kenny Corp. bond? (Do not round intermediate calculations.Round your answer to 2 decimal places (e.g., 32.16).)

Price

$

Requirement 2:

What is the bond’s current yield? (Round your answer to 2 decimal places (e.g., 32.16).)

Current yield

%

Answer 1

Face Value of kenny Bond = $1000

Annual Coupon Payment = $1000*7.240%

= $72.40

No of Years to Maturity(n) = 16 years

Yield = 6.26%

Calculating the Price of Bond:-

+ ... Coupon Payment (1+YTM)" Price Coupon Payment Coupon Payment + (1+YTM) (1 + YTM2 FaceValue (1+YTM)

$Price = \frac{72.40}{(1+0.0626)^{1}}+\frac{72.40}{(1+0.0626)^{2}}+.....+\frac{72.40}{(1+0.0626)^{16}}+\frac{1000}{(1+0.0626)^{16}}$

Price = $718.78 + $378.514

Price = $1097.29

So, The price of bond of Kenny Corp is $1097.29

b). Current Yield = Coupon payment/Current price

= $72.40/$1097.29

= 6.60%

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