What is the yield on a very long-term bond with a $500 face value, a coupon of $35, and a current price of $650?

Question

Quizplus · Accepted Answer

To calculate the yield of the bond, we need to use the formula:

Yield = (Annual Interest + (Face Value - Current Price) / Years to Maturity) / ((Face Value + Current Price) / 2)

Plugging in the numbers, we get:

Yield = (35 + (500 - 650) / 100) / ((500 + 650) / 2)
Yield = 5.4%

Therefore, the yield on this bond is 5.4%. Answer choice C is correct.

What Is the Yield on a Very Long-Term Bond with a $500