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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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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