A bond pays interest of $45 every six months, matures in 5 years, and is priced to yield 6.5%. What is the current yield of this bond?
K = Nx2 |
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2 |
k=1 |
K =5x2 |
Bond Price =∑ [(9*1000/200)/(1 + 6.5/200)^k] + 1000/(1 + 6.5/200)^5x2 |
k=1 |
Bond Price = 1105.28 |
current yield = coupon rate*par value/current price |
Current yield%=(9/100)*1000/1105.28 |
Current yield% = 8.14 |
A bond pays interest of $45 every six months, matures in 5 years, and is priced...
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