Question

Consider the bond (newly issued, issued on Nov 2013) for a country A: Face value $10 million Coupon rate 4.3% If this bond is purchased (in April 2014) at $7 million, instead of $10 million, the yield would be:

Answer 1

Current Yield = 6.14%

Step-by-step explanation:

Face Value = $10 million

Current Price = $7 million

Coupon Rate = 4.3%

Coupon Payment = 10 x 4.3% = $430,000 annually

Current yield = Annual Coupon Payment ÷ Current price of the bond

Current Yield = $430,000 ÷ $7,000,000 = 6.14%