Question

Do-well bonds have a face value of 1000 and are currently quoted at 86.725. The bonds have coupon rate of 6.5 percent. What is the current yield on these bonds?

Answer 1

Answer:

Current yield = 74.95%

Explanation:

Face value of the bond is $1,000

Coupon rate = 6.5%

Annual coupon rate = $1000 * 6.5% = 65

Currently quoted bond = 86.725

Current yield = Annual interest / Market price of the bond * 100

Current yield = 65 / 86.725 * 100

Current yield = 0.7495 * 100

Current yield = 74.95%