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) Last Price 94.223 LastEST $ Vol Yield Xenon, Inc. (XIC) Kenny Corp. (KCC) Williams Co. (WICO) Coupon 5.800 7.160 Maturity Jan 15, 2024 Jan 15, 2023 Jan 15, 2030 (000's) 57,366 48,945 43,806 5.22 6.92 94.775 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.) Price 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.] Current yield

Answer 1

1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =7

Bond Price =∑ [(7.16*2000/100)/(1 + 5.22/100)^k]     +   2000/(1 + 5.22/100)^7

k=1

Bond Price = 2222.73

2

Current yield = coupon*par value/current price = 7.16*2000/2222.73 = 6.4425%