What is the yield on a one-year corporate bond with a $1,000 face value that pays a 12% annual dividend if it was purchased for $950 and held until maturity?

Question

Quizplus · Accepted Answer

The yield is calculated as (Coupon Payment + (Face Value - Purchase Price)) / Purchase Price. Here, the coupon payment is $120 (12% of $1,000), and the gain from the price difference is $50 ($1,000 - $950). So, the yield is ($120 + $50) / $950 = $170 / $950 = 17.9%.

What Is the Yield on a One-Year Corporate Bond with a $1,000