Alaska Power Company issued $1,000 bonds that have an annual coupon rate of 6.5%.The present market value of the bonds is $1,225.If the bonds have 17 years remaining until maturity,what is the current yield on Alaska Power Company bonds?

Question

Quizplus · Accepted Answer

The current yield is calculated as the annual coupon payment divided by the current market price of the bond. The annual coupon payment is $65 (6.5% of $1,000), and the current market price is $1,225. Thus, the current yield is $65 / $1,225 = 0.0531 or 5.3%.

Alaska Power Company Issued $1,000 Bonds That Have an Annual