Joel Barber purchased a $1,000 bond for $985.The coupon rate of interest is 8.5 percent,and the bond matures in 10 years.What is Joel's current yield on this bond?Joel Barber purchased a $1,000 bond for $985.The coupon rate of interest is 8.5 percent,and the bond matures in 10 years.What is Joel's current yield on this bond?

Question

Joel Barber purchased a $1,000 bond for $985.The coupon rate of interest is 8.5 percent,and the bond matures in 10 years.What is Joel's current yield on this bond?Joel Barber purchased a $1,000 bond for $985.The coupon rate of interest is 8.5 percent,and the bond matures in 10 years.What is Joel's current yield on this bond?​

Quizplus · Accepted Answer

First, we need to find out the annual interest payment on the bond. The coupon rate is 8.5 percent and the face value of the bond is $1,000, so the annual interest payment is ($1,000 x 8.5%) = $85.

Now, we need to calculate the current yield on the bond. This is the annual interest payment divided by the price paid for the bond:

($85 / $985) x 100% = 8.63%

Therefore, Joel's current yield on this bond is 8.63 percent, which is closest to answer choice D.

Joel Barber Purchased a $1,000 Bond for $985