A $1,000 face value bond, with an annual coupon of $40, one year to maturity and a purchase price of $980 has:

Name: A $1,000 face value bond, with an annual coupon of $40, one year to maturity and a purchase price of $980 has:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The current yield is calculated as the annual coupon payment divided by the purchase price: $40 / $980 = 4.08%. The yield to maturity considers both the coupon payment and the gain from the bond being purchased at a discount, leading to a YTM of approximately 6.12%.

A $1,000 Face Value Bond, with an Annual Coupon of $40