ZZZ bond issued at face of $1000 with annual coupon rate 10%

Finance Aug 13, 2020

ZZZ bond issued at face of $1000 with annual coupon rate 10%. if the price of bond is $980. Find the current Yield of bond? Select one: O A. 10% OB. 9% O C. 10.2% O D. 9.8%

Expert Solution

Yield of the bond is inversely proportional to bond price and coupon rate.

If Price of bond is less than Face value then yield will be more than Coupon rate.

Here Coupon rate is 10%.

price of bond is $980 which is less than face value.

hence yield should be more than coupon rate

That means yield will be more than 10%.

So option C 10.2% is correct here.

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