Question

Kevin has a 2000 bond which a 5% coupon. Kevin purchase this bond for 2070$. What is this yield of this new bond?

Answer 1

Answer: A similar question states "Kevin has a 2000 bond which a 5% coupon. Kevin purchased this bond for 2075$. What is thie yield of this new bond?"

It also has the same answer, 4.8%.

Step-by-step explanation: took the quiz.

Answer 2

4.8%

Explanation:

Bond par value = $2000

Coupon rate = 5% =
`(5)/(100)` = 0.05

Market price of bond = $2070

Current yield of bond =
`(Annual Dollar Interest Paid)/(Market Price) *100`%

=
`\frac{Coupon\hspace{3}rate*Bond\hspace{3}par\hspace{3}value}{Market\hspace{3}Price} *100`%

=
`(0.05*2000)/(2070) *100`%

=
`(100)/(2070) *100`%

= 0.048*100%

= 4.8%