A 3.25 percent Treasury bond is quoted at a price of 99.04. The bond pays interest semiannually. What is the current yield?

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual interest payment by the bond's current price. For a 3.25 percent Treasury bond, the annual interest payment is 3.25% of the bond's par value (assumed to be $100 for simplicity), which equals $3.25. Given the bond's price of 99.04, the current yield is ($3.25 / $99.04) * 100 = 3.28 percent.

A 325 Percent Treasury Bond Is Quoted at a Price of of 99.04