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A coupon bond that pays interest of $56 annually has a par value of $1,000, matures in 5 years, and is selling today at a $74.25 discount from par value. The current yield on this bond is _________.

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Answer:

The current yield on this bond is 110 %.

Explanation:

The following data can be extracted from the question :

pmt = $56

p/yr = 1

Fv = $1,000

n = 5

Pv = - $74.25

r = ?

The current yield on this bond r, can be calculated using a financial calculator.

Enter the data and obtain r as 109.8984%

Thus the  current yield of this bond is 110 %

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