Asked by
Koizumi Kenichiro
on Dec 08, 2024
Verified
A coupon bond pays annual interest, has a par value of $1,000, matures in four years, has a coupon rate of 8.25%, and has a yield to maturity of 8.64%. The current yield on this bond is
A) 8.65%.
B) 8.45%.
C) 7.95%.
D) 8.36%.
E) None of the options are correct.
Coupon Bond
A type of debt security that pays the holder periodic interest payments based on the coupon rate until maturity, at which point the principal is repaid.
Yield To Maturity
The total return anticipated on a bond if the bond is held until its maturity date, accounting for interest payments and repayment of principal.
Par Value
The face value of a bond or stock as stated by the issuer, often used in the context of bonds and preferred stock.
- Learn the process involved in calculating the current yield of coupon bonds.
- Comprehend the factors affecting bond prices and yields.
Verified Answer
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Learning Objectives
- Learn the process involved in calculating the current yield of coupon bonds.
- Comprehend the factors affecting bond prices and yields.