Question

Sweet Sue Foods has bonds outstanding with a coupon rate of 5.02 percent paid semiannually and sell for $1,948.34. The bonds have a par value of $2,000 and 17 years to maturity. What is the current yield for these bonds

Answer 1

Answer:

5.15%

Explanation:

Following data provided in the question

Coupon rate = 5.02%

Present value of the bond = $1,948.34

Par value = $2,000

Time period = 17 years

By considering the above information, the current yield on the bond is

= (Par value × coupon rate interest) ÷ (Present value of the bond)

= ($2,000 × 5.02%) ÷ ($1,948.34)

= 5.15%