A $1,000 face value bond purchased for $965.00, with an annual coupon of $60, and 20 years to maturity has a:

Question

Quizplus · Accepted Answer

The current yield is calculated by dividing the annual coupon payment by the purchase price of the bond. In this case, the current yield is:

($60/$965) x 100% = 6.22%

Therefore, the correct answer is A. Option B is incorrect because the current yield is not equal to the coupon rate. Option C is also incorrect because the coupon rate is 6%, but the current yield is different due to the purchase price being less than face value. Option D is also incorrect because the yield to maturity may be different from the current yield.

A $1,000 Face Value Bond Purchased for $965