A bond has a face value of $1,000 and an annual interest payment of $44. What is its coupon rate, and what is its yield if it is sold for $1,100 in the secondary market?
A) 4.0% and 4.4%, respectively
B) 4.4% and 4.0%, respectively
C) 4.4% and 10%, respectively
D) 44% and 4.4%, respectively

Question

Quizplus · Accepted Answer

Coupon rate = Annual interest payment / Face value = 44/1000 = 0.044 or 4.4%
Yield = Annual interest payment / Market price = 44/1100 = 0.04 or 4.0%

A Bond Has a Face Value of $1,000 and an Annual