Question

A coupon bond that pays interest of $54 annually has a par value of $1,000, matures in 5 years, and is selling today at a $73.75 discount from par value. The current yield on this bond is _________.

Answer 1

The current yield on this bond is 7.21 %.

Step-by-step explanation:

The yield of the bond, YTM can be determined using a financial calculator as follows :

Pv = $1,000 - $73.75 = - $926.25

Pmt = $54

n = 5

p/yr = 1

Fv = $1,000

YTM = ?

Using a Financial Calculator, the yield of the bond, YTM is 7.2088 or 7.21 %