Final answer:
To calculate the yield of a bond, you need to consider the annual coupon payments and the capital gains upon maturity relative to the price you paid. The given example calculation for a bond with expected payments of $1,080 and a purchase price of $964 results in a yield of 12%. However, for the FedFarmer 3 20 bond, the necessary information to calculate yield is not fully provided.
Step-by-step explanation:
You bought a bond of FedFarmer 3 20 with a price of $82.24. What is the yield of this bond? To calculate the yield, you would take into account the face value of the bond, the price you paid, and the coupon rate. Assuming the face value is $1,000 and the coupon rate is 3% (from the mention "FedFarmer 3 20"), you would receive $30 annually in coupon payments. The yield can be calculated by considering the annual coupon payments plus the capital gain you would receive upon maturity, compared to the price you paid for the bond. Given a similar scenario provided for reference, where a bond's expected payments are $1,080 in the last year (including the final interest payment and the face value), and the purchase price is $964, the yield is calculated as ($1080 – $964)/$964 = 12%. In your case, we need more information to calculate the exact yield, such as the maturity of the bond and the annual coupon payment. However, this calculation method can be applied once the necessary data is available.