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.

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 EST $ Vol (000's) 57,372 48,951 43,812 Company (Ticker) Xenon, Inc. XIC) Kenny Corp. KCC) Williams Co. (WICO) Last Last Coupon 6.400 Yield Maturity Jan 15, 2030 Jan 15, 2029 Jan 15, 2036 Price 94.283 ?? 5.34 7.220 ?? 94.835 ?? 7.04 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

Par Value = $2,000

Annual Coupon Rate = 7.220%
Semiannual Coupon Rate = 3.610%
Semiannual Coupon = 3.610% * $2,000
Semiannual Coupon = $72.20

Time to Maturity = 13 years
Semiannual Period = 26

Annual YTM = 5.340%
Semiannual YTM = 2.670%

Current Price = $72.20 * PVIFA(2.670%, 26) + $2,000 * PVIF(2.670%, 26)
Current Price = $72.20 * (1 - (1/1.0267)^26) / 0.0267 + $2,000 / 1.0267^26
Current Price = $2,349.21

Current Yield = Annual Coupon / Current Price
Current Yield = $144.40 / $2,349.21
Current Yield = 0.0615 or 6.15%