Recently, Chrysler bonds with a face value of $100 closed at $103.The coupon rate was 12.75 percent.The current yield on these bonds was

Question

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The current yield is calculated as the annual interest payment divided by the current market price of the bond. Here, the annual interest payment is 12.75% of $100, which is $12.75. Since the bond closed at $103, the current yield is $12.75 / $103 = 0.1238 or 12.38%, which is less than the coupon rate of 12.75%.

Recently, Chrysler Bonds with a Face Value of $100 Closed