Suppose there is exactly one year left until maturity on a bond with an annual coupon...

Question

Question

Suppose there is exactly one year left until maturity on a bond with an annual coupon payment. The coupon rate is 3.97 percent, and the bond is currently selling at $947.16. What is the current yield?

Current yield:

Answer 1

Answer #1

Solution:

Assume par value of bond = $1000

Coupon rate = 3.97%

Interest = 1000*3.97%= $39.70

Current market price= $947.16

Current yield = interest / current market price

Current yield = $39.70/$947.16= 4.19%

Current yield =4.19%

Answer 2

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