To calculate the number of years until maturity, assume that it is currently Jan

Question

To calculate the number of years until maturity, assume that it is currently January 15, 2010.

Company
(Ticker)
Coupon Maturity Last
Price Last
Yield EST $ Vol
(000’s)
Xenon, Inc. (XIC) 6.900 Jan 15, 2035 94.333 ?? 57,377
Kenny Corp. (KCC) 7.270 Jan 15, 2032 ?? 6.32 48,956
Williams Co. (WICO) ?? Jan 15, 2041 94.885 7.14 43,817

Requirement 1:

What price would you expect to pay for the Kenny Corp. bond? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Price $

Requirement 2:

What is the bond’s current yield? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current yield %

Explanation / Answer

Assume annual coupon payment
Coupon payment = 100*0.0727 = 7.27
There will be 22 payments to go (2010-2032)

Price = (7.27/0.0632)*(1-1/1.063222)+(100/1.063222)

Price = 124.82

Current yield = Coupon payment / Price = 7.27/124.82 = 0.0582 or 5.82%

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