Suppose that you own a bond with a coupon rate of 8% and currently selling at a premium of 101.75. What is the current yield? (Round to the nearest tenth percent)

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual coupon payment by the bond's current price. Here, the annual coupon payment is 8% of the bond's face value (assuming a face value of 100 for simplicity), which equals 8. The bond is selling at a premium of 101.75. Therefore, the current yield = (8 / 101.75) * 100 = 7.9%.

Suppose That You Own a Bond with a Coupon Rate