A corporate bond is quoted at a price of 98.96 and has a coupon rate of 4.8 percent, paid semiannually. What is the current yield?

Question

Quizplus · Accepted Answer

The current yield is calculated as the annual coupon payment divided by the bond's current price. The annual coupon payment is 4.8% of the face value (assumed to be $100), which is $4.80. The bond's price is 98.96% of the face value, or $98.96. Thus, the current yield is $4.80 / $98.96 = 0.0485 or 4.85 percent.

A Corporate Bond Is Quoted at a Price of 98