Asked by
Brian Ellis
on Nov 04, 2024
Verified
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 8.7%, and has a yield to maturity of 7.9%. The current yield on this bond is
A) 8.39%.
B) 8.43%.
C) 8.83%.
D) 8.66%.
E) None of the options are correct.
Coupon Bond
A type of bond that pays the holder a fixed interest payment (coupon) at regular intervals until the maturity date when the principal and the final interest payment are paid.
Yield To Maturity
The total return anticipated on a bond if the bond is held until its maturity date, factoring in its current price, interest payments, and face value.
Par Value
The face value of a bond or stock as stated by the issuing company, which may differ from its market value.
- Comprehend the methodology for determining the current yield of coupon bonds.
- Identify the elements influencing bond prices and yields.
Verified Answer
MO
Learning Objectives
- Comprehend the methodology for determining the current yield of coupon bonds.
- Identify the elements influencing bond prices and yields.