Question

Health Foods bonds have 10 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 9%. They pay interest annually and have a 10% coupon rate. What is their current yield

Answer 1

Answer:

The current yield of the bond is 9.73%

Explanation:

We can calculate the Current Yield of the Bond by using the following formula:

Current Yield = Coupon Interest / Current Market Price in step 1         * 100

Current Yield = ($1,000 * 10%) / ($1,064 from step 1)               * 100

Current Yield = 9.37%

Step 1. Calculate the current price of the bond: