A coupon bond which pays interest of $60 annually, has a par value of $1,000, matures in 5 years, and is selling today for $915.48. The yield to maturity on this bond is approximately:_______
Answer: b. 6.49% Explanation: Calculation for The current yield on this bond First step is to calculate the Current price Current price = $1,000 - 75.25 Current price = $924.75 Now let calculate the Current yield using this formula Current yield =Coupon bond interest/Current price Let plug in the formula Current yield = $60/$924.75 Current yield = 6.49% Therefore the current yield on this bond is 6.49%
