Question

Loretta Scholten buys nine bonds of Leo Co. 7 1/4 16 at 103.375. The commission is $3.00 per bond. The current yield to the nearest tenth of a percent is:_______a. 7.0%b. 7.1%c. 7.2%d. 7.3%e. None of these

Answer 1

the current yield is 7.0%

Option a) 7.0% is the current answer

Explanation:

Given that;

coupon payment = 7 1/4% = 7.25% = 0.0725

bond price = 103.375.

we know that

Current Yield = [ coupon payment / Bond prices ]

= [100 × 0.0725] / [ 103.375 ]

= 7.25 / 103.375

= 0.0701 or 7.0% {nearest tenth percent}

therefore the current yield is 7.0%

Option a) 7.0% is the current answer