In: Finance
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) 6.100 Jan 15, 2027 94.253 ?? 57,369 Kenny Corp. (KCC) 7.190 Jan 15, 2026 ?? 5.28 48,948 Williams Co. (WICO) ?? Jan 15, 2033 94.805 6.98 43,809 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 %
(1)-Amount expect to pay for the Kenny Corp. bond
Variables |
Financial Calculator Keys |
Figures |
Par Value/Face Value of the Bond [$2,000] |
FV |
2,000 |
Coupon Amount [$2,000 x 7.19% x ½] |
PMT |
71.90 |
Market Interest Rate or Yield to maturity on the Bond [5.28% x ½] |
1/Y |
2.64 |
Maturity Period/Time to Maturity [(Jan 15, 2016 to Jan 15, 2026) x 2] |
N |
20 |
Bond Price |
PV |
? |
Here, we need to set the above key variables into the financial calculator to find out the Price of the Bond. After entering the above keys in the financial calculator, we get the Price of the Bond (PV) = $2,293.85.
“Amount expect to pay for the Kenny Corp. bond will be $2,293.85”
(2)-Bond’s Current Yield
Bond’s Current Yield = [Annual Coupon Amount / Bond’s Price] x 100
= [($2,000 x 7.19%) / $2,293.85] x 100
= [$143.80 / $2,293.85] x 100
= 6.27%
“Hence, the Bond’s Current Yield will be 6.27%”