Suppose the ZZZ Corporation sells a one-year coupon bond for $1,000 and its coupon payment is $100. In this example, the yield is _____. If instead the price of the bond is $500, the yield is _____.

Question

Quizplus · Accepted Answer

The yield is calculated as the coupon payment divided by the price of the bond. For a $1,000 bond with a $100 coupon, the yield is 10% ($100/$1,000). If the bond price is $500, the yield is 20% ($100/$500).

Suppose the ZZZ Corporation Sells a One-Year Coupon Bond for $1,000