Question

The bonds have a par value of $2,000 and semiannual coupons.

Company (Ticker) Coupon Maturity Last Price Last Yield EST $ Vol (000’s)

Xenon, Inc. (XIC) 6.500 Jan 15, 2034 94.293 ? 57,373

Kenny Corp. (KCC) 7.230 Jan 15, 2033 ? 5.36 48,952

Williams Co. (WICO) ? Jan 15, 2040 94.845 7.06 43,813


What price would you expect to pay for the Kenny Corp. bond?

Answer 1

$2,365.02

Step-by-step explanation:

For computing the price we have to applied the Present value formula i.e to be shown in the attachment

Given that,

Future value = 2,000

Rate of interest = 5.36% ÷ 2 = 2.68%

NPER = 14 years × 2 = 28 years

PMT = $2,000 × 7.230% ÷ 2 = $72.3

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

So, after applying the above formula, the price of the bond is $2,365.02

The 14 years is taken from

= Year 2033 - year 2019

= 14 years