Tom Inc. bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65, paid semiannually. The current price is $960. What is the current yield? Group of answer choices a)7.16% b)7.17% c)6.77% d)6.5%
Tom Inc. bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65, paid semiannually. The current price is $960. What is the current yield? Group of answer choices a)7.16% b)7.17% c)6.77% d)6.5%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Tom Inc. bonds mature in 8 years, have a par value of $1,000, and make an annual coupon interest payment of $65, paid semiannually. The current price is $960. What is the current yield?
Group of answer choices
a)7.16%
b)7.17%
c)6.77%
d)6.5%
Expert Solution
Step 1Basic Information
The current yield of a bond is calculated by dividing the annual coupon payment by the bond's current market value. It is calculated with the help of following formula
Current Yield = Annual Coupon × 100
Current Market Price
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