A $1,000 face value bond has a 6.35 percent semi-annual coupon and sells for $960.00. What is the current yield?
A)6.75%
B)6.82%
C)6.89%
D)6.99%
E)6.61%

Question

Quizplus · Accepted Answer

The current yield of a bond is calculated by dividing the annual coupon payment by the market price of the bond. Since the bond has a semi-annual coupon rate of 6.35%, the annual coupon payment is $1,000 * 6.35% = $63.50. Given that the bond sells for $960.00, the current yield is ($63.50 / $960.00) * 100% = 6.61%.

A $1,000 Face Value Bond Has a 6