Final answer:
The current yield (CY) of the 20-year City of Salt Lake School district bond, which was purchased for $800 and has a 4% stated rate, is 5%.
Step-by-step explanation:
The question is asking to calculate the current yield (CY) of a bond.
The bond was purchased for $800 and has a face value of $1,000 with a stated interest rate of 4%.
The current yield is calculated by taking the annual interest payment and dividing it by the price paid for the bond (not its face value).
In this case, the bond will pay $40 per year ($1,000 x 4%) in interest. Therefore, the current yield is $40 / $800 = 0.05, or 5%.
The complete question is:content loaded
Your Client Dana McCann just purchased a 20-year City of Salt Lake School district bond for $800. If the bond has a stated rate of 4%, the current yield (CY) is___