Question

A bond with an annual coupon rate of 7.1% sells for $974.76. What is the bond’s current yield? (Round your answer to 2 decimal places.) Current yield %:

Answer 1

7.28%

Step-by-step explanation:

The formula for bond current yield is the annual coupon amount divided by the current market price of the bond as shown below:

current yield =annual coupon/market price

annual coupon=face value*coupon rate

face value is $1000

coupon rate is 7.1%

annual coupon=$1000*7.1%=$71

current market price is $974.76

current yield=$71/$974.76=7.28%