finance
posted by carmen on .
Brown Enterprises’ bonds currently sell for $1,025. They have a 9year maturity, an annual coupon of $80, and a par value of $1,000. What is their current yield?

So the present value
= 1000(1+i)^9 + 80(1  (1+i)^9 )/i
so 1000(1+i)^9 + 80(1  (1+i)^9 )/i = 1025
A very nasty equation to solve.
I tried a few values:
i = .08, RS = 1000 , looking for 1025
i = .09, RS = 940, so let's lower the i
i = .07, RS = 1065 , too low
i = .075, RS = 1031.894 getting closer
i = .077, RS = 1018.977
ok, so i is between .075 and .077
.075 .... 1031.894
i ...........1025
.077 ......1018.977
use interpolation by setting up a ratio
(i  .075)/(.077.075) = (10251031.894)/(1018.9771031.894)
I will leave the arithmetic up to you, but I got
i = .07607