A bond pays interest of $45 every six months, matures in 5 years, and is priced...

Question

Question

A bond pays interest of $45 every six months, matures in 5 years, and is priced to yield 6.5%. What is the current yield of this bond?

business finance

Answer 1

Answer #1

K = Nx2

Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k] + Par value/(1 + YTM/2)^Nx2

k=1

K =5x2

Bond Price =∑ [(9*1000/200)/(1 + 6.5/200)^k] + 1000/(1 + 6.5/200)^5x2

k=1

Bond Price = 1105.28

current yield = coupon rate*par value/current price

Current yield%=(9/100)*1000/1105.28

Current yield% = 8.14

Answer 2

Similar Homework Help Questions

4. If a $1,000 bond pays no coupon interest, matures in 8 years and is priced...

4. If a $1,000 bond pays no coupon interest, matures in 8 years and is priced to yield 6.6%, what is the price of the bond?
A 15-year corporate bond pays $45 interest every six months. What is the bond's price if...

A 15-year corporate bond pays $45 interest every six months. What is the bond's price if the bond's promised YTM is 5.5 percent? $1,261.32 $1,253.12 $1,250.94 $1,263.45 $1,354.36
4. An Earl Enterprises bond has an 8 percent coupon, pays interest semiannually, and matures in...

4. An Earl Enterprises bond has an 8 percent coupon, pays interest semiannually, and matures in six years at $1,000. If the current market price is $911.33, what is the yield to maturity for this bond?

A coupon bond that pays interest annually has a par value of $1,000, matures in six...

A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%. The intrinsic value of the bond today will be ________ if the coupon rate is 7.5%. A) $886.28 B) $851.93 C) $1,123.01 D) $1,000.00 E) $712.99
if a bond pays 37 interest annually, matures after 14 years and costs 1026, the current...

if a bond pays 37 interest annually, matures after 14 years and costs 1026, the current yield on this bond must be ___%.
a 30 year bond matures in 7 years sells for $1,125 pays interest semiannually a face...

a 30 year bond matures in 7 years sells for $1,125 pays interest semiannually a face value of $1,000 and has a yield to maturity of 10.5%. What is the bond's current yield?

An investor buys a bond for $5,000. The bond pays $207 interest every six months. After...

An investor buys a bond for $5,000. The bond pays $207 interest every six months. After 18 months, the investor sells the bond for $4,676. Describe the types of income and/or loss the investor had. The current income is $________. (Round to the nearest dollar.) The investor would experience a capital gain or a capital loss or neither (choose one) in the amount of $________. ( if a loss, enter a loss as a negative number rounded to the nearest...
A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five)...

A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five) years, has a coupon rate of 7.45%, and has a yield to maturity of 8.82%. The current yield on this bond is ________%. (2 decimal place)
A convertible bond is selling for $967, matures in 15 years, has a $1,000 face value,...

A convertible bond is selling for $967, matures in 15 years, has a $1,000 face value, pays interest semiannually, and has a coupon rate of 8 percent. Similar non-convertible bonds are priced to yield 4.25 percent per six months. The conversion ratio is 20. The stock currently sells for $47.50 a share. Calculate the convertible bond's option value.

A coupon bond that pays interest of $55 annually has a par value of $1,000, matures...

A coupon bond that pays interest of $55 annually has a par value of $1,000, matures in 5 years, and is selling today at a $74.00 discount from par value. The current yield on this bond is _________.