Question

Williams software has 8.7 percent coupon bonds on the market with 22 years to maturity. The bonds make semiannual payments and currently sell for 111 percent of par. What is the current yield on the bonds?

Answer 1

The current yield on Williams software's 8.7 percent coupon bonds, which are sold at 111 percent of par value and make semiannual payments is approximately 7.84%.

Step-by-step explanation:

To calculate the current yield on Williams software's bonds, we first need to determine the annual coupon payment and then divide it by the current market price of the bond. the bonds have a coupon rate of 8.7 percent and a par value of $1,000, meaning that each bond pays $87 in interest annually ($1,000 x 8.7%). Since they are sold for 111 percent of par, their market price is $1,110 ($1,000 x 111%). The current yield is thus the annual coupon payment divided by the bond's market price, which would be $87/$1,110, or approximately 7.84%.