In 2022, a customer buys 5 GE 10% bonds, M '42 at 90. The interest payment dates are Feb 1st and Aug 1st. The bonds are callable as of 2027 at 107. The current yield on the bonds is:
To find the current yield on the bonds, we need to calculate the annual interest payment and divide it by the current market price of the bonds.
Each bond has a face value of $1000, and it pays a 10% coupon rate. Therefore, the annual interest payment per bond is 10% of $1000, which is $100.
Since the customer buys 5 bonds, the total annual interest payment is 5 * $100 = $500.
The customer buys the bonds at a price of 90, which means the market price is 90% of the face value. So, the market price per bond is $1000 * 90% = $900.
Therefore, the current yield on the bonds is ($500 / $900) * 100% = 55.56%.
To calculate the current yield on the GE 10% bonds, we need to determine the annual interest payment, the purchase price, and divide the annual interest payment by the purchase price.
1. Annual Interest Payment:
The bonds have a 10% coupon rate, which means they pay 10% of the face value in interest each year. Since the face value is not mentioned, we cannot determine the exact annual interest payment. Please provide the face value of each bond to proceed with the calculation.
Once we have the face value, we can calculate the annual interest payment by multiplying it by the coupon rate (10%).