Immersive Technologies has bonds outstanding that mature in 20 years.The bonds have $1000 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

Quizplus · Accepted Answer

The current yield on the bonds is not 11.63%, as that rate is higher than the stated annual interest rate of 10%. The current yield is actually 10/875.25 = 1.144%, which is lower than 11.63%.

Immersive Technologies Has Bonds Outstanding That Mature in 20 Years