The 8 percent,$1,000 face value bonds of Sweet Sue Foods are currently selling at $1,057.These bonds have 16 years left until maturity.What is the current yield?

Question

Quizplus · Accepted Answer

The current yield is calculated as the annual interest payment divided by the current market price of the bond, expressed as a percentage.

The annual interest payment is 8% of the face value, which is $1,000 x 8% = $80.

The current market price of the bond is $1,057.

Therefore, the current yield is $80 / $1,057 = 0.0757 or 7.57%.

The best choice is B.

The 8 Percent,$1,000 Face Value Bonds of Sweet Sue Foods