Question

A bond that pays interest semiannually has a price of $975.11 and a semiannual coupon payment of $28.25. If the par value is $1,000, what is the current yield

Answer 1

5.79%

Explanation:

For the computation of current yield first we need to find the annual coupon is shown below:-

Annual Coupon = Coupon payment × Semi annual

= $28.25 × 2

= $56.5

Current Yield = Annual Coupon ÷ Market Price

= $56.5 ÷ $975.11

= 0.0579

or

= 5.79%

Therefore for computing the current yield we simply applied the above formula so that the correct rate could come