The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

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Quizplus · Accepted Answer

The current yield is calculated as the annual coupon payment divided by the current market price of the bond. The annual coupon payment is 6.5% of the face value, which is $1,000, so it's $65. The bonds are quoted at 102.9, meaning they are selling for 102.9% of their face value, or $1,029. The current yield is therefore $65 / $1,029 = 0.0632, or 6.32 percent.

The Outstanding Bonds of the River Front Ferry Carry a 6.5