A bond has a face value of $10,000,a price of $12,000,and coupon payments of $2000 for two years.The current yield of this bond is

Question

Quizplus · Accepted Answer

To find the current yield, we need to use the formula:
Current Yield = Annual Coupon Payment / Market Price

The annual coupon payment is $2000, so for two years, the total coupon payment is $4000.

The market price is $12,000.

Current Yield = $4000 / $12,000 = 0.333 or 33.3%

However, we need to divide this by 2 to get the annual current yield.

Annual Current Yield = 33.3% / 2 = 16.7%

Therefore, the answer is choice B, with a current yield of 16.7%.

A Bond Has a Face Value of $10,000,a Price of $12,000,and