Question

Yield to call on a bond with a coupon rate of 8?

1) 3.5
2) 6.49
3) 7.0
4) 8.16

Answer 1

The bond yield on a bond with a coupon rate of 8% is 8%.

Step-by-step explanation:

The bond yield on a bond with a coupon rate of 8% can be calculated by following these steps:

1. Assume the $1,000 face value of the bond.
2. Calculate the annual interest payment by multiplying the face value by the coupon rate: $1,000 x 0.08 = $80.
3. Consider the investor will receive the $1,000 face value plus the $80 interest payment, totaling $1,080.
4. The bond yield is then calculated by subtracting the original purchase price ($1,000) from the total return ($1,080) and dividing that by the purchase price: ($1,080 - $1,000) / $1,000 = 8%.

Therefore, the bond yield on a bond with a coupon rate of 8% is 8%.