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. Company (Ticker) Coupon Maturity Last Price Last Yield EST $ Vol (000’s) Xenon, Inc. (XIC) 7.300 Jan 15, 2042 94.373 ?? 57,381 Kenny Corp. (KCC) 7.310 Jan 15, 2039 ?? 6.40 48,960 Williams Co. (WICO) ?? Jan 15, 2045 96.925 6.65 43,821

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.)

Answer 1

Bond's Market Value = PV of Coupon Payment + PV of Maturity Value

= [Periodic Coupon Payment * {(1 - (1 + r)^-n) / r}] + [Face Value / (1 + r)^n]

(96.925%*$2,000) = [{(C%/2)*$2,000} * {(1 - (1 + 0.0665/2)^-(26*2)) / (0.0665/2)}] + [$2,000 / {1 + (0.0665/2)}^(26*2)]

$1,938.50 = [(C%*$1,000) * {0.8175 / 0.03325}] + [$2,000 / 5.4788]

$1,938.50 = [(C%*$1,000) * 24.5858] + $365.05

$1,938.50 - $365.05 = [C%*$24,585.76336]

$1,573.45 / $24,585.76 = C%

C% = 0.0640, or 6.40%