A bond with a par value of $100 is currently trading at a price of $104. The bond has a coupon rate of 4.16%, and it has exactly 10 years remaining until maturity. What is the bond’s current yield?
An investor buys a bond with a $100 par value and a 5% coupon rate for $97. The bond pays interest semiannually. Exactly one year later, just after receiving the second coupon payment, the investor sells the bond for $96. What was the investor’s rate of return over the year from owning the bond?
1.
| NPER | 20 | [10*2] |
| FV | 100 | |
| PMT | 4.16 | [1000*4.16%] |
| PV | 104 | |
| Current yield | 3.87% | [Rate ( nper, pmt,-pv,fv)] |
2. Coupon payment = 100* 5% = $5
Loss on payment = $97 - $ 96 = $1
Return = $5 - $1 = $4
Rate of return = ($4 / $97) *100 = 4.123%
A bond with a par value of $100 is currently trading at a price of $104....
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