A $1,000 par value bond paying a 8% semi-annual coupon with 19 years to maturity is priced at $1105

Finance Jun 22, 2021

A $1,000 par value bond paying a 8% semi-annual coupon with 19 years to maturity is priced at $1105. This bond is callable in 11 years at a price of $1,050.

What is this bond's Current Yield?

Group of answer choices

6.93%

7.24%

7.85%

6.54%

Expert Solution

Computation of Bond's Current Yield:

Bond's Current Yield = Annual Coupon Payment / Current Stock Price

= (1000*8%)/1105

= 80/1105

Bond's Current Yield = 7.24%

So, the correct option is 2nd "7.24%".

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