question archive A bond matures in 12 years, and pays an 8 percent annual coupon
A bond matures in 12 years, and pays an 8 percent annual coupon
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A bond matures in 12 years, and pays an 8 percent annual coupon. The bond has a face value of $1,000, and currently sells for $985. What is the bond’s current yield and yield to maturity?
A. Current yield = 8.00%; yield to maturity = 7.92%.
B. Current yield = 8.12%; yield to maturity = 8.20%.
C. Current yield = 8.20%; yield to maturity = 8.37%.
D. Current yield = 8.12%; yield to maturity = 8.37%.
E. Current yield = 8.12%; yield to maturity = 7.92%.
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Answer:
Coupon Rate=8%
Current Yield=(80/985)/100
=8.12%
Yield to maturity=(I+(F-P)/n)/(F+P)/2
=(80+(1000-985)/12)/(1000+985)/2
=(80+1.25)/992.5
=8.19%(approx.)
=8.20%
Answer- B Current Yield= 8.12%: yield to maturity=8.20%
