Question

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon. The bonds have a face value of $1,000 and are currently quoted at 102.9. What is the current yield on these bonds?

Answer 1

The current yield on The River Front Ferry bonds is approximately 6.33%.

Step-by-step explanation:

The current yield on The River Front Ferry bonds can be calculated by dividing the annual interest payment by the current market price of the bond.

First, calculate the annual interest payment by multiplying the coupon rate (6.5%) by the face value of the bond ($1,000), which gives you $65.

Next, calculate the current yield by dividing the annual interest payment ($65) by the current market price of the bond (102.9% of the face value, or $1,029), and then multiply by 100 to get the percentage.

So, the current yield on The River Front Ferry bonds is approximately 6.33%.