A corporate bond is quoted at a price of 98.625 with a 7.500 coupon.The bond pays interest semiannually.What is the current yield on one of these bonds?

Question

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The current yield is calculated as the annual coupon payment divided by the bond's current price. The annual coupon payment is 7.500% of the face value (assumed to be $1000), which is $75. The bond's price is 98.625% of the face value, which is $986.25. The current yield is $75 / $986.25 = 7.60%.

A Corporate Bond Is Quoted at a Price of 98