Question

A fixed-rate corporate bond issue has the following characteristics: A nominal coupon rate of 6% with...

A fixed-rate corporate bond issue has the following characteristics:

A nominal coupon rate of 6% with semiannual coupon payments; an original maturity of 40 years; and a face value of $1,000. 12 years after the issue date, market interest rates for comparable bond issues are 8%.

What is the current yield on this bond?

Group of answer choices

5.14%

7.89%

10.29%

7.71%

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Homework Answers

Answer #1

Given,

Coupon rate = 6%

Years left to maturity = 40 years - 12 years = 28 years

Face value = $1000

Market interest rate = 8%

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