A bond with no expiration date has a face value of $10,000 and pays a fixed 10 percent interest.If the market price of the bond rises to $11,000, the annual yield approximately equals
A)11 percent.
B)10 percent.
C)9 percent.
D)8 percent.

Question

Quizplus · Accepted Answer

The annual yield is calculated by dividing the annual interest payment by the current market price of the bond. The bond pays $1,000 annually (10% of $10,000). If the market price is $11,000, the yield is $1,000 / $11,000 = 0.0909 or approximately 9 percent.

A Bond with No Expiration Date Has a Face Value