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Bond Interest Payments, Price of a Bond and Yield to Maturity Question

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Please help with the following problem. Provide step by step calculations.

Assume it is early 2003 and the following bond quotations appeared in the Wall Street Journal:

ConocoPhillips (COP) 5.900 Oct 15, 2032 95.972 6.200 90 30 88,510
Amerada Hess (AHC) 7.125 Mar 15, 2033 100.145 7.113 179 30 55,000

a. How much in annual interest payment would an investor in each of these bonds receive?

b. How much would you have to pay to buy one COP bond at the last price shown?

c. Why do you think the yield-to-maturity on the AHC bond is higher than the yield to maturity on the COP bond?

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Solution Summary

The solution explains various calculations relating to bond interest payments, price of bond and yield to maturity. Step by step calculations are provided for the solution.

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a. How much in annual interest payment would an investor in each of these bonds receive?

The first figure is the interest rate. The coupon rate on COP is 5.9% and so the annual interest is 1,000X5.9%=$59. The coupon rate on AHC is 7.125% and ...

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