A 12-year bond pays an annual coupon of 10 percent

Finance Aug 12, 2020

A 12-year bond pays an annual coupon of 10 percent. The bond has a yield to maturity of 9.5 percent and a par value of $1,000. What is the bond's current yield?

Expert Solution

Price of the bond = - PV (Rate, Nper, PMT, FV) = - PV (9.5%, 12, 10% x 1000, 1000) = 1,034.92

Current yield = Annual coupon / Price = 10% x 1000 / 1,034.92 = 9.66%

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