Generic, Inc. has bonds outstanding that mature in 20 years. The bonds have $1,000 par value, pay interest annually at a rate of 10%, and have a current selling price of $875.25. The current yield on the bonds is 11.63%

Question

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The current yield formula is annual interest payment divided by current market price. We can calculate the annual interest payment as $1,000 x 10% = $100. Therefore, the current yield is $100/$875.25 = 11.43%, which is different from the given 11.63%. Therefore, the statement is false.