What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $800?
A)7 percent
B)7.5 percent
C)8.00 percent
D)8.75 percent
E)10 percent

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual interest payment by the current market value of the bond and then multiplying that result by 100. For this bond, the annual interest payment is $70 (7 percent of $1,000). The current yield is therefore ($70 / $800) x 100, which equals 8.75 percent. Therefore, answer choice D is correct.

What Is the Current Yield for a $1,000 Corporate Bond