Question

You purchase a bond with a coupon rate of 8.5% and par value of $2,000. The value of the bond rose to $2,500. What is the bond?

Answer 1

The bond yield is 6.80%.

Explanation:

Note: This question is not complete. The complete question is therefore provided before answering the question as follows:

You purchase a bond with a coupon rate of 8.5% and par value of $2,000. The value of the bond rose to $2,500. What is the bond yield?

The bond can now be calculated as follows:

Coupon payment = Coupon rate * Bond per value = 8.5% * $2,000 = $170

Bond yield = Coupon payment / Current value of the bond = $170 / $2,500 = 0.068, or 6.80%

Therefore, the bond yield is 6.80%.