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10-9B

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Essentials Of Investments
Found in: Page 329
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Short Answer

A bond with an annual coupon rate of 4.8% sells for $970. What is the bond’s current yield?

The current yield is 4.95%.

See the step by step solution

Step by Step Solution

Given information

Annual coupon rate = 4.8%

Par value = $1000

Bond Price = $970

Calculation of Current yield

Annual coupon = Annual coupon rate x Par value

= 4.8% x $1000

= $48

Current yield = Annual Coupon / Bond Price

= $48 / $970

= 4.95%

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