Question

If the annual interest rate printed on the face of a bond is 25 percent, the face value of the bond is $1,000, and the current market price of the bond is $700, what is the current yield on the bond?

Answer 1

Answer: Current yield on the bond = 35.71%

Step-by-step explanation:

Given that,

Annual interest rate printed on the face of a bond = 25 percent

the face value of the bond = $1,000

the current market price of the bond = $700

Therefore,

current yield on the bond =
`(Annual\ interest\ rate\ on\ the\ face\ of\ the\ bond)/(Current\ price\ of\ the\ bond) * 100`

=
`(0.25*1000)/(700) * 100`

= 35.71 %