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A coupon bond which pays interest of $60 annually, has a par value of $1,000, matures in 5 years, and is selling today for $915.48. The yield to maturity on this bond is approximately:_______ a. 7.23%
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A coupon bond which pays interest of $60 annually, has a par value of $1,000, matures in 5 years, and is selling today for $915.48. The yield to maturity on this bond is approximately:_______

a. 7.23%
b. 6%
c. 8.12%
d. 9.45%

User Anna Slastnikova
by
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1 Answer

4 votes
Answer:
b. 6.49%
Step-by-step explanation:
Calculation for The current yield on this bond
First step is to calculate the Current price
Current price = $1,000 - 75.25
Current price = $924.75
Now let calculate the Current yield using this formula
Current yield =Coupon bond interest/Current price
Let plug in the formula
Current yield = $60/$924.75
Current yield = 6.49%
Therefore the current yield on this bond is 6.49%
User Baronvonbirra
by
7.9k points
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