Ajax Corp.has a bond with a coupon rate of 12%,maturing in 15 years at $1,000 per bond.The current market price is $960.What is the current yield?

Question

Quizplus · Accepted Answer

To calculate the current yield, we need to divide the annual coupon payment by the current market price and express it as a percentage. The annual coupon payment is 12% of $1000, which is $120.

Current yield = (Annual coupon payment / Current market price) x 100%

Current yield = ($120 / $960) x 100%

Current yield = 12.5%

Therefore, the current yield is 12.5%. The closest option is B, which is 12.6%, so that is the best choice.

Ajax Corphas a Bond with a Coupon Rate of 12%,maturing in in 15