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26 March, 09:09

Genova Corporation has a four year 10% annual coupon bond. The price of the bond is $956.12. The Yield to Maturity is 11.43%. What is the current yield on this bond

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  1. 26 March, 11:34
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    10.46%

    Explanation:

    Data provided in the question

    NPER = 4 years

    Price of the bond is $956.12

    Yield to maturity is 11.43%

    Coupon rate = 10%

    We assume the face value be $1,000

    So the coupon payment is

    = Face value * Coupon rate

    = $1,000 * 10%

    = $100

    Now the current yield on this bond is

    = Coupon payment : Price of the bond

    = $100 : $956.12

    = 10.46%
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