Final answer:
The current yield of the XYZ April 2041 bond is 5.75%, the coupon payment is $55, and the market value is $956.25. The yield to maturity (YTM) requires a more complex calculation, usually with a financial calculator.
Step-by-step explanation:
The student is asking about bond valuation and yield calculations, which are important concepts in finance. Here we evaluate an XYZ April 2041 bond with specific details provided.
A) The current yield is calculated by dividing the annual coupon payment by the market price of the bond. With a 5.5% coupon interest rate on a $1,000 par value bond, the annual coupon payment is $1,000 * 0.055 = $55. The bond's price is currently 95.625% of its par value, so the market price is $1,000 * 0.95625 = $956.25. The current yield is therefore $55 / $956.25 = 0.0575 or 5.75%.
B) Yield to maturity (YTM) is more complex to calculate, it takes into account all cash flows from the bond (coupon payments and par value at maturity) and equates them to the current market price using a discount rate (the YTM). This typically requires solving using a financial calculator or iterative numerical methods, as it involves solving for the rate in the present value of an annuity equation. Calculating the exact YTM goes beyond the confines of this response.
C) The coupon payment for this bond is found by multiplying the par value by the coupon rate, which yields $1,000 * 0.055 = $55.
D) The market value of the bond is the same as the price given, since the market value is what the bond is currently trading for on the market: $1,000 * 0.95625 = $956.25.