What is the current yield on the following bond?Par value $1000Coupon

QUESTION

What is the current yield on the following bond?Par value $1000Coupon rate 8%Years to maturity 12Market interest rate 7%Market price $1080a. 80/1000 = 8.7%b. 70/1080 = 6.5%c. 70/1000 = 7.6%d. 80/1080 = 7.4%e. (8 * 7)/1000 = 5.6%
Yield is a figure that shows the return you get on a bond. The simplest version of yield is calculated using the following formula: yield = coupon amount/price. When you buy a bond at par, yield is equal to the interest rate. When

e price changes, so does the yield. So if the market price is in picture we use it rather than the par value and hence current yield = 80/1080 = 7.4% Ans D

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