Dividend Yield

Assume you have a bond with a semiannual interest payment of $35, a par value of $1,000, and a current market of $780. What is the current yield of the bond?

Expert Solution

The current yield shows the dividend as a percentage given by the company on its shares. It keeps on changing as the market price of the share changes.

Current yield is calculated by dividing the annual dividend by its current market price.

Semi-annual dividend = $35

Current Market Price = $ 780

$ \begin{align*}\rm\text{Current Yield} &= \frac{\rm\text{Annual Dividend}}{\rm\text{Current Market Price}}\\ &= \dfrac{2\times \$35}{\$780}\\ &= \dfrac{\$70}{\$780}\\ &= 0.0897 \rm\text{ or } 8.97\%\end{align*} $

The current yield of the bond is 8.97%

The current yield on the bond is 8.97%

Vinay answered 3 years ago

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