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27 February, 19:10

Consider the bond (newly issued, issued on Nov 2013) for a country A: Face value $10 million Coupon rate 4.3% If this bond is purchased (in April 2014) at $7 million, instead of $10 million, the yield would be:

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  1. 27 February, 20:49
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    Current Yield = 6.14%

    Explanation:

    Face Value = $10 million

    Current Price = $7 million

    Coupon Rate = 4.3%

    Coupon Payment = 10 x 4.3% = $430,000 annually

    Current yield = Annual Coupon Payment : Current price of the bond

    Current Yield = $430,000 : $7,000,000 = 6.14%
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