Question

assume you own a corporate bond that has a face value of $1,000 and pays 5.8 percent. what is the current yield if the bond is currently selling for $1,160?

Answer 1

The current yield of a corporate bond with a face value of $1,000 and a coupon rate of 5.8% that is selling for $1,160 is calculated to be 5%.

Step-by-step explanation:

The student is asking about calculating the current yield of a corporate bond. The bond has a face value of $1,000 and pays an interest rate, or coupon rate, of 5.8%, but it is currently trading at $1,160. To calculate the current yield, we need to take the annual coupon payment and divide it by the current market price of the bond. The annual coupon payment is 5.8% of the face value, which is $1,000 x 0.058 = $58. Now, we divide this by the current market price of the bond, which is $1,160.

So, the current yield would be: Current Yield = (Annual Coupon Payment / Market Price of Bond) = $58 / $1,160 = 0.05, or 5%