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21 February, 07:30

If the annual coupon rate is 7 percent on a $1000 face value bond with market price equal to $ 985. Find current yield

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  1. 21 February, 09:59
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    7.1%

    Step-by-step explanation:

    Current yield is the ratio of coupon payment of a bond to its current market price. It is calculated by using coupon payment and the current market value of the bond.

    As per given data

    Coupon rate = 7%

    Face value = $1,000

    Market Value = $985

    Coupon Payment = $1,000 x 7% = $70

    Formula for Current yield is as follow

    Current Yield = Annual Coupon Payment / Current Market Price

    Current Yield = $70 / $985

    Current Yield = 7.11%
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