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20 June, 06:50

Sweet Sue Foods has bonds outstanding with a coupon rate of 5.44 percent paid semiannually and sell for $1,930.36. The bonds have a par value of $2,000 and 17 years to maturity. What is the current yield for these bonds

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  1. 20 June, 08:15
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    Current yield=5.6%

    Explanation:

    The current yield is the proportion of the current price of a bond earned as annual interest payment.

    Current yield = annual interest payment/bond price

    Annual interest payment = coupon rate * face value

    = 5.44% * $2000

    = $108.8

    Current yield

    = annual interest payment/price

    = $ (108.8/1,930.36) * 100

    = 5.6%

    Note we used the annual interest payment nothwithstanding that interests are paid semi-annually
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Home » Business » Sweet Sue Foods has bonds outstanding with a coupon rate of 5.44 percent paid semiannually and sell for $1,930.36. The bonds have a par value of $2,000 and 17 years to maturity. What is the current yield for these bonds
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