Question

A bond with an annual coupon rate of 7.2% sells for $988.22. What is the bond’s current yield? (Round your answer to 2 decimal places.)

Answer 1

7.29%

Step-by-step explanation:

The computation of the current yield of the bond is shown below;

Current yield is

= (Par value × annual coupon rate) ÷ Selling price of the bond

= ($1,000 × 7.2%) ÷ $988.22

= $72 ÷ $988.22

= 7.29%

Hence, the bond current yield is 7.29%

This is to be computed by applying the above formula so that the current bond yield could arrive