The following is a T-bond quote (par value $1,000) from the WSJ (8/31/2018). Use the information...

Question

Question

The following is a T-bond quote (par value $1,000) from the WSJ (8/31/2018). Use the information...

The following is a T-bond quote (par value $1,000) from the WSJ (8/31/2018). Use the information in the quote to answer the question.

Maturity	Coupon	Bid	Asked	Chg	Asked Yield
8/31/2,022	4.31	108:15	108:20	-14	???

What is the current yield on this bond? (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16). Use a negative sign to represent a discount.)

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Answer 1

Answer #1

Remember investors buy at the ask and sell at the bid price.

Hence, the current yield = Annual coupon / Ask Price = 4.31% x 100 / 108.20 = 3.98%

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Answer 2

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The following is a T-bond quote (par value $1,000) from the WSJ (8/31/2018). Use the information...