Investment VehiclesPregunta 21 de 110
A bond with a 5% coupon and $1,000 par is purchased for $800. What is its current yield?
a.6.25%
b.5.00%
c.4.00%
d.8.00%
Explicación
Current yield equals annual coupon income divided by market price, or $50 divided by $800, which equals 6.25%. Because the bond trades at a discount, the current yield exceeds the 5% coupon rate. Current yield ignores any gain realized at maturity.
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