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Finance

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What is the current yield of a annual coupon bond with a 6% coupon, four years until maturity, and a price of $750?

  • Finance - ,

    What you probably really want is the Yield To Maturity (YTM). Assume the bond returns a $1000 face value after 4 years. That is what face value means. The coupon rate is the annual fraction of THAT value paid out.

    With annual interest payments, the YTM is 14.7%. Most bonds make an interest payment semiannually. That won't change the YTM much.

    There are online Java tools and formulas for computing YTM.

    See, for example,
    http://www.investopedia.com/calculator/AOYTM.aspx?viewed=1

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