Question
6. Consider the corporate bond issue information contained in the table on the next page. It is taken from the August 31, 2020 edition of
6. Consider the corporate bond issue information contained in the table on the next page. It is taken from the August 31, 2020 edition of Barron's. It is end-of-the-month information about the forty most active fixed-coupon corporate bonds that traded during the last week of August. As you know, it is hard for me to look at things such as this without getting my calculator out to spot check to see if the information is accurate and makes sense. Let's do that on one of the listed bonds. Look at the Johnson & Johnson (JNJ) bond that has a coupon of 2.250% and a maturity of Sep 01, 2050. It is the 15th bond down from the top. The table indicates the Last Price was 96.888 and the Last Yield was 2.396%. There is likely to be some rounding contained within those numbers. Assuming this provided yield to maturity of 2.396% and that the bond pays interest semi-annually (as most corporate bonds do), please undertake and display a clear and accurate calculation process to determine whether your estimated price of the bond can or cannot confirm the price of 96.888 that is in the table. Please note that the column with the Last Price information in the table is presented numerically in percentage terms. That is the Last Price for the JNJ bond is listed as 96.888 which should be interpreted as 96.888% of Face Value. In undertaking your price calculation for the bond, assume a Face Value of $1,000 as we typically have done in class. Therefore, 96.888% of a Face Value of $1,000 would be a price of something at or around 968.88. CARRY OUT ALL CALCULATION PROCESS TO AT LEAST 5 DECIMAL PLACES FOR ME TO SEE.
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