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Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 8% with semiannual payments of $40, and a par value of $1,000. The price of each bond in the issue is $1,
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31 votes
Ace Products has a bond issue outstanding with 15 years remaining to maturity, a coupon rate of 8% with semiannual payments of $40, and a par value of $1,000. The price of each bond in the issue is $1,196.00. The bond issue is callable in 5 years at a call price of $1,080. What is the bond's current yield

User Omerkudat
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1 Answer

16 votes
16 votes

Answer:

6.69%

Step-by-step explanation:

Price of Ace products bond issue = $1,196

Annual coupon payment = $80

Current yield = Annual coupon payment / Bond price

Current yield = $80/$1,196

Current yield = 0.0668896

Current yield = 6.69%

User Bwagner
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