Assume it is 2003 and the following bond quotations appeared in the Wall Street Journal: How much in annual interest payment would an investor in each of these bonds receive?
ConocoPhillips 5,900 Oct 15, 2032 95,972 6,200 90 30 88,510
How much would you have to pay? Why do you think the yield to maturity on the AHC bond is higher than the yield to maturity on the COP bond?
To determine the annual interest payment an investor would receive for each of these bonds, we need to find the bond's "coupon rate" or "interest rate." The coupon rate is the fixed annual interest rate that the bond issuer promises to pay to the bondholder.
Looking at the information provided, we can see the following details for the ConocoPhillips (COP) bond: maturity date (Oct 15, 2032), price ($95,972), and yield to maturity (YTM) of 6.2%.
To calculate the annual interest payment for the COP bond, we need to multiply the coupon rate by the bond's face value or principal. Unfortunately, we don't have the face value mentioned explicitly in the given information. Generally, bond prices are quoted as a percentage of their face value, so we'll assume the face value is $1000 for simplicity.
First, we'll find the coupon rate by subtracting the YTM from 100 and dividing the result by 2. Assuming semi-annual payments:
Coupon Rate = (100 - YTM) / 2 = (100 - 6.2) / 2 = 93.8 / 2 = 46.9%
Now, we can calculate the annual interest payment:
Annual Interest Payment = Coupon Rate x Face Value = 0.469 * $1000 = $469
Therefore, an investor in the ConocoPhillips bond would receive an annual interest payment of $469.
Unfortunately, the information provided for the AHC bond seems incomplete or missing some key data like the price, YTM, or maturity date. Without this essential information, we cannot determine the annual interest payment or compare the yield to maturity between the AHC and COP bonds.