Question

13. If a 7% coupon bond is trading for $975.00, it has a current yield of ____________ percent.

A) 7.00

B) 6.53

C) 7.24

D) 7.18

14. If a 6% coupon bond is trading for $950.00, it has a current yield of ____________ percent.

A) 6.5

B) 6.3

C) 6.1

D) 6.0

E) 6.6

15. If an 8% coupon bond is trading for $1025.00, it has a current yield of ____________ percent.

A) 7.8

B) 8.7

C) 7.6

D) 7.9

E) 8.1

16. If a 7.5% coupon bond is trading for $1050.00, it has a current yield of ____________ percent.

A) 7.0

B) 7.4

C) 7.1

D) 6.9

E) 6.7

Answer 1

Assuming face value to br $1000

a)

Annual coupon = (7 / 100) * 1000 = 70

Current yield = (Annual coupon / price) * 100

Current yield = (70 / 975) * 100

Current yield = 7.18

b)

Annual coupon = (6 / 100) * 1000 = 60

Current yield = (Annual coupon / price) * 100

Current yield = (60 / 950) * 100

Current yield = 6.3

c)

Annual coupon = (8 / 100) * 1000 = 80

Current yield = (Annual coupon / price) * 100

Current yield = (80 / 1025) * 100

Current yield = 7.8

d)

Annual coupon = (7.5 / 100) * 1000 = 75

Current yield = (Annual coupon / price) * 100

Current yield = (75 / 1050) * 100

Current yield = 7.1