Answer:
The correct answer is 7.27%.
Explanation:
The price of the bond is $1,100.
The face value is $1,000.
The coupon rate is given as 8%.
The current yield of the bond will be
= [tex]\frac{coupon\ rate\ \times face\ value}{bond's\ price}[/tex]
= [tex]\frac{0.08\times 1,000}{1,100}[/tex]
= [tex]\frac{80}{1100}[/tex]
= 0.0727
This means that the current yield on the bond is 7.27%.
