A $2000 Treasury bond with a coupon rate of 4.84% that has a market value of $1675
The current yield is _____%.
.0484 * 2000 = 96.80 is paid
but you buy the bond for 1675
so you get (96.80/1675)*100 = 5.78 percent
To calculate the current yield, we need to divide the annual coupon payment by the market value of the bond, and then multiply the result by 100 to express it as a percentage.
Step 1: Calculate the annual coupon payment.
Coupon rate = 4.84%
Face value of the bond = $2000
Coupon payment = Coupon rate x Face value
Coupon payment = 4.84% x $2000
Coupon payment = $96.80
Step 2: Calculate the current yield.
Market value of the bond = $1675
Current yield = (Annual coupon payment / Market value of the bond) x 100
Current yield = ($96.80 / $1675) x 100
Current yield ≈ 5.8%
Therefore, the current yield is approximately 5.8%.
To calculate the current yield of a bond, you need two pieces of information: the annual interest payment (coupon payment) and the market value of the bond.
The coupon payment is calculated by multiplying the coupon rate by the face value of the bond. In this case, the coupon rate is 4.84% and the face value is $2000. So the coupon payment is:
Coupon payment = Coupon rate * Face value
Coupon payment = 4.84% * $2000
Coupon payment = $96.80
The market value of the bond is given as $1675.
Now, to calculate the current yield, divide the coupon payment by the market value of the bond and multiply by 100 to express it as a percentage.
Current yield = (Coupon payment / Market value) * 100
Current yield = ($96.80 / $1675) * 100
Current yield ≈ 5.79%
Therefore, the current yield of the bond is approximately 5.79%.