If the annual interest rate printed on the face of a bond is 7 percent,the face value of the bond is $1,000,and the current market price of the bond is $250,what is the current yield on the bond?

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual interest payment by the current market price of the bond. The annual interest payment is 7% of $1,000, which is $70. The current yield is $70 / $250 = 0.28 or 28 percent.

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