Question

Bond A has the following features:          Face value = $1,000,        Coupon Rate = 5%,        Maturity...

Bond A has the following features:

         Face value = $1,000,       

Coupon Rate = 5%,       

Maturity = 10 years, Yearly coupons

         The market interest rate is 6.30%

What is the current yield for bond A from today to year 1?

Calculate your answer to 2 decimal places (e.g., 5.23)

Homework Answers

Answer #1

The current yield = Annual coupon/Current price

FV = 1,000

Annual coupon, cpn = 1,000 * 0.05 = 50

n = 10

r = 6.3%

The current yield = Annual coupon/Current price

The current yield = 50/905.6642395147

The current yield = 0.0552080979

The current yield = 5.52080979%

The current yield = 5.52%

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