Question

DK ent has issued a Ghs 1000 face value bond that makes coupon payments of Ghs...

DK ent has issued a Ghs 1000 face value bond that makes coupon payments of Ghs 40 semi-annually. the bond has a 30-year maturity and is selling for Ghs 1276.76.calculate the current yield

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Answer #1

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Correct Answer: 6.2659%

Working :

Current Yield = Annual Coupon payment / Current selling price of Bond

Parameters provided in the question,

Selling Price of the bond = Ghs 1276.76

Coupon Payment = Ghs 40 (Semi annually)

Therefore,

Current Yield of the bond of DK ent = (40 + 40 ) / 1276.76 (Since the coupons are paid twice in a year)

Current Yield of the bond of DK ent = 80 / 1276.76 = 0.0625 OR 6.2659%

Thus, Current yield = 6.2659%

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