Question

Consider a bond with a face value of $100 and a time to maturity of one year. If the current market price of the bond is $96, what is the bond yield? (Provide your answer in decimal form to four decimal places, i.e. 1.55% - 0.0155)

Answer 1

4.17% or 0.0417

Step-by-step explanation:

the present value of your investment is $96

the future value of your investment is $100

time period n = 1

using the future value formula:

$100 = $96 x (1 + r)¹

1 + r = $100 / $96 = 1.04167

r = 1.04167 - 1 = 0.04167 = 4.167%= 4.17%