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) Coupon Maturity Last Price Last Yield EST $ Vol (000’s) Xenon, Inc. (XIC) 5.900 Jan 15, 2025 94.233 ?? 57,367 Kenny Corp. (KCC) 7.170 Jan 15, 2022 ?? 6.12 48,946 Williams Co. (WICO) ?? Jan 15, 2028 96.785 6.37 43,807 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.) Coupon rate %

Answer 1

Par Value = $2,000
Current Price = $2,000 * 96.785%
Current Price = $1,935.70

Time to Maturity = 12 years
Semiannual Period to Maturity = 24

Annual Yield = 6.37%
Semiannual Yield = 3.185%

Let semiannual coupon be $x

$1,935.70 = $x * PVIFA(3.185%, 24) + $2,000 * PVIF(3.185%, 24)
$1,935.70 = $x * (1 - (1/1.03185)^24) / 0.03185 + $2,000 / 1.03185^24
$1,935.70 = $x * 16.60293 + $2,000 * 0.47120
$1,935.70 = $x * 16.60293 + $942.40
$993.30 = $x * 16.60293
$x = $59.83

Semiannual Coupon = $59.83

Semiannual Coupon Rate = $59.83 / $2,000
Semiannual Coupon Rate = 2.99%

Annual Coupon Rate = 2 * 2.99%
Annual Coupon Rate = 5.98%