A bond with a par value of $1,000 is selling for $1,057 and has a current yield of 7.4 percent. What is the coupon rate on the bond?

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Quizplus · Accepted Answer

The current yield of a bond is calculated by dividing the annual interest payment by the bond's current market price. Given a current yield of 7.4% and a market price of $1,057, the annual interest payment can be calculated as $1,057 * 7.4% = $78.218. To find the coupon rate, which is the percentage of the par value ($1,000) that is paid as interest, we divide the annual interest payment by the par value: $78.218 / $1,000 = 7.8%.

A Bond with a Par Value of $1,000 Is Selling