Question

You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2019 and the bonds have a par value of $2,000. Company (Ticker) Coupon Maturity Last Price Last Yield EST $ Vol (000’s) Xenon, Inc. (XIC) 6.800 Jan 15, 2037 94.323 ?? 57,376 Kenny Corp. (KCC) 7.260 Jan 15, 2034 ?? 6.30 48,955 Williams Co. (WICO) ?? Jan 15, 2040 96.875 6.55 43,816 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

Company (Ticker)            Coupon                Maturity              Last Price             Last Yield EST $ Vol (000’s) Williams Co. (WICO) ??                                 Jan 15, 2040        96.875                   6.55                        43,816

Par Value = $2,000

Current Price = 96.875% * $2,000
Current Price = $1,937.50

Annual YTM = 6.550%
Semiannual YTM = 3.275%

Time to Maturity = 21 years
Semiannual Period = 42

Let Semiannual Coupon be $C

$1,937.50 = $C * PVIFA(3.275%, 42) + $2,000 * PVIF(3.275%, 42)
$1,937.50 = $C * (1 - (1/1.03275)^42) / 0.03275 + $2,000 / 1.03275^42
$1,937.50 = $C * 22.645929 + $516.691649
$1,420.808351 = $C * 22.645929
$C = $62.74

Semiannual Coupon = $62.74

Annual Coupon = 2 * $62.74
Annual Coupon = $125.48

Coupon Rate = $125.48 / $2,000
Coupon Rate = 0.0627 or 6.27%