If the annual interest rate printed on the face of a bond is 16 percent,the face value of the bond is $1,000,and the current market price of the bond is $200,what is the current yield on the bond?

Question

Quizplus · Accepted Answer

The current yield on a bond is calculated by dividing the annual interest payment by the current market price of the bond. The annual interest payment is 16 percent of the face value, which is $1,000, so the annual interest payment is $160. The current market price of the bond is $200. Therefore, the current yield is $160 / $200 = 0.8, or 80 percent.

If the Annual Interest Rate Printed on the Face of a Bond