Question

A Puppy Pet Services $1,000 bond has a 7.5 percent coupon rate, matures in 2016, and is currently quoted at $820. The current yield is:A. 6.15 percent. B. 7.50 percent. C. 9.15 percent. D. 10.27 percent. E. 11.43 percent.

Answer 1

Answer:

Option (C) is correct.  

Explanation:

Face Value = $1,000

Current Price = $820

Annual Coupon Rate = 7.50%

Annual Coupon = Annual Coupon Rate × Face Value

                           = 7.50% × $1,000

                           = $75

Current Yield = Annual Coupon ÷ Current Price

                      = $75 / $820

                      = 0.0915 or 9.15%