If a 6.75% coupon bond is trading for $1,016.00, it has a current yield of

A) 7.38%.
B) 6.64%.
C) 7.25%.
D) 8.53%.
E) 7.18%.

Question

If a 6.75% coupon bond is trading for $1,016.00, it has a current yield ofA)  7.38%.B)  6.64%.C)  7.25%.D)  8.53%.E)  7.18%.

Karena Escalett · Accepted Answer

Final Answer : B, Explanation :  The current yield of a bond is calculated by dividing the annual coupon payment by the market price of the bond. For a 6.75% coupon bond, the annual coupon payment is 6.75% of the face value, which is typically $1,000, so the annual coupon payment is $67.50. The current yield is then $67.50 / $1,016.00 = 0.0664 or 6.64%.

If a 6.75% coupon bond is trading for $1,016.00, it has a current yield of

A) 7.38%.
B) 6.64%.
C) 7.25%.
D) 8.53%.
E) 7.18%.

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