Question

Calculate the current yield on the described bond. a $2000

treasury bond with a coupon rate of 5.3% that has a market value of
$1900

Answer 1

The current yield can be calculated by dividing the annual interest payment (coupon) by the market value of the bond.

Step-by-step explanation:

To calculate the current yield on a bond, you need to divide the annual interest payment (coupon) by the market value of the bond. In this case, the coupon rate is 5.3% and the market value is $1900.

To calculate the annual interest payment, multiply the coupon rate by the face value of the bond. In this case, the face value is $2000 and the coupon rate is 5.3%, so the annual interest payment is $2000 x 5.3% = $106.

Then, divide the annual interest payment by the market value of the bond and multiply by 100 to get the current yield as a percentage. In this case, the current yield is ($106 / $1900) x 100 = 5.58%.