American Hat has $1,000 face value bonds outstanding with a market price of $1,150.

American Hat has $1,000 face value bonds outstanding with a market price of $1,150. The bonds pay interest semiannually, mature in 8 years, and have a yield to maturity of 5.98 percent. What is the current yield?

Multiple Choice

7.28 percent
6.15 percent
6.44 percent
7.06 percent

Solutions

Expert Solution

Calculating Coupon Payment on Bond,

Using TVM Calculation,

PMT = [PV = -1,150, FV = 1,000, N = 16, I = 0.0598/2]

PMT = 41.83

Current Yield = 2(41.83)/1,150

Current Yield = 7.28%

jeff jeffy answered 2 years ago

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