Question

A bond that pays interest semiannually has a price of $1,043.47 and a semiannual coupon payment of $27.00. If the par value is $1,000, what is the current yield

Answer 1

5.175%

Step-by-step explanation:

Given that:-

Par value = $1,000

Market value = $1,043.47

Semi-annual coupon = $27.00

The computation of current yield is given below :-

So, the annual coupon

= Semi-annual coupon × semi annual basis

= $27.00 × 2

= $54

So, the current yield

= Annual coupon ÷ Market value × 100

= $54 ÷ $1,043.47 × 100

= 5.175%