Suppose that you purchased a Baa rated $1000 annual coupon bond with an 6.6 % coupon...

Suppose that you purchased a Baa rated $1000 annual coupon bond with an 6.6 % coupon rate and a 4-year maturity at 8 % above par value. What would the current yield (in %) be at time of purchase (4 digits)?

Expert Solution

Current Yield = Annual coupon/Current Price

Price = $1000 * (1 + 8%) = $1,080

Annual COupon = 6.6% * $1000 = $66

Current Yield = $66/$1080 = 6.1111% (or 0.0611)

jeff jeffy answered 2 years ago

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