A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 7.3 percent. What is the current price of this bond?
A)$958.90
B)$978.41
C)$1,068.00
D)$1,029.41
E)$1,104.00

Question

Quizplus · Accepted Answer

The current yield is calculated as the annual coupon payment divided by the current price. The annual coupon payment is $70 (7% of $1,000). Given the current yield is 7.3%, the equation is $70 / Price = 0.073. Solving for Price gives $958.90.

A 7 Percent Coupon Bond Has a Face Value of $1,000