Jessica paid $7,000 for a bond with a face value of $6,000.She will be paid $400 annually as long as she holds on to the bond,until the bond's maturity date.The yield on the bond is
A) 6.67 percent.
B) 5.71 percent.
C) 15.0 percent.
D) 80.0 percent.

Question

Quizplus · Accepted Answer

The yield on the bond is calculated as the annual interest payment divided by the purchase price of the bond. In this case, the annual interest payment is $400 and the purchase price of the bond is $7,000. Therefore, the yield on the bond is $400/$7,000 = 6.67%.

Jessica Paid $7,000 for a Bond with a Face Value