Assume that today's date is August 15, 2015 and that the Kroger Bond is an annual-coupon bond. Describe what each of the following terms mean and how each value was determined if appropriate
Company
Price
Coupon Rate Maturity Date
YTM Current Yield
Rating
Kroger 84.00 6.875% 8-15-2020 10.576% 8.185% B2
What will be an ideal response?
Answer: Kroger is the issuer. The value of 84.00 in the category price means that the bond is currently selling for 84% of the bond's par value. The coupon rate is the annual interest rate. This bond matures five years from today, and is the date on which the final interest installment is paid and the principal is repaid. A value of 6.875% means the bond pays out this percentage of the bond's par value each year. The YTM is the yield to maturity and represents the return you would receive if you purchased the bond today at the price of $84.00 per $100 of face value and held it to maturity. The YTM is determined by market forces. The current yield is found by dividing the annual coupon payment by the current price. The rating is the bond rating for this bond—a grade indicating credit quality.
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