A $1,000 bond with a coupon rate of 6.5% has a market price of $950. What is the current yield?

Name: A $1,000 bond with a coupon rate of 6.5% has a market price of $950. What is the current yield?
Brand: Quizplus
Rating: 4.8 (54 reviews)

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual coupon payment by the market price of the bond. Here, the annual coupon payment is 6.5% of $1,000, which is $65. The market price of the bond is $950. So, the current yield = ($65 / $950) * 100% = 6.84%, which rounds to approximately 6.8%.

A $1,000 Bond with a Coupon Rate of 6