Consolidated Industries bonds have a face value of $1,000 and make interest payments of $45 every six months. If these bonds currently sell for $920, what is the current yield on these bonds?
The current yield is calculated by dividing the annual interest payment by the current market price of the bond, and then multiplying by 100 to get a percentage.
Since the bond makes interest payments of $45 every six months, the annual interest payment can be calculated by multiplying $45 by 2 (to get the total interest payment for the year) which is $90.
The current market price of the bond is $920.
So, the current yield on the bonds is (90/920) * 100 = 9.78%.
Therefore, the current yield on these bonds is approximately 9.78%.
The current yield on a bond is calculated by dividing the annual interest payments by the bond's current market price.
Given that the face value of the Consolidated Industries bond is $1,000 and it makes interest payments of $45 every six months, the annual interest payment can be calculated by doubling the biannual payment:
Annual interest payment = 2 * biannual payment
= 2 * $45
= $90
Since the bonds currently sell for $920, the current yield can be calculated as follows:
Current yield = (Annual interest payment / Current market price) * 100
= ($90 / $920) * 100
Calculating the current yield:
Current yield ≈ (0.0978) * 100
≈ 9.78%
Therefore, the current yield on the Consolidated Industries bonds is approximately 9.78%.
To calculate the current yield on these bonds, we need to divide the annual interest payment by the current market price and multiply it by 100 to get a percentage.
First, let's find the annual interest payment. Since the bonds make interest payments of $45 every six months, we can calculate the annual interest payment by multiplying it by 2: $45 * 2 = $90.
Next, we divide the annual interest payment by the current market price: $90 / $920 = 0.0978.
Finally, we multiply the result by 100 to convert it to a percentage: 0.0978 * 100 = 9.78%.
Therefore, the current yield on these Consolidated Industries bonds is approximately 9.78%.