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, 2013. Company (Ticker) Coupon Maturity Last Price Last Yield EST $ Vol (000’s) Xenon, Inc. (XIC) 7.00 Jan 15, 2036 94.343 ?? 57,378 Kenny Corp. (KCC) 7.28 Jan 15, 2033 ?? 6.34 48,957 Williams Co. (WICO) ?? Jan 15, 2042 94.895 7.16 43,818 Required: What is the yield to maturity for the bond issued by Xenon, Inc.? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Yield to maturity %

Explanation / Answer

Explanation:

Here we need to find the yield to maturity. The dollar price of the bond is:

Dollar price = 94.343% × $1,000

Dollar price = $943.43

So, the bond price equation is:

P = $943.43 = $35.0(PVIFA R%,46 ) + $1,000(PVIF R%,46 )

Using a spreadsheet, financial calculator, or trial and error, we find:

R = 3.76%

This is the semiannual interest rate, so the YTM is:

YTM = 2 × 3.76%

YTM = 7.52%

Calculator Solution:

Enter

23 × 2

±$943.43

$70 / 2

$1,000

Period Cash Flow 0 -943.43 1 35 2 35 3 35 4 35 5 35 6 35 7 35 8 35 9 35 10 35 11 35 12 35 13 35 14 35 15 35 16 35 17 35 18 35 19 35 20 35 21 35 22 35 23 35 24 35 25 35 26 35 27 35 28 35 29 35 30 35 31 35 32 35 33 35 34 35 35 35 36 35 37 35 38 35 39 35 40 35 41 35 42 35 43 35 44 35 45 35 46 1035 YTM 3.76% IRR(B2:B48)

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