question archive Assume a bond of salalah company is trading on Muscat security market at 1850 OMR, and paying 0
Assume a bond of salalah company is trading on Muscat security market at 1850 OMR, and paying 0
Subject:FinancePrice:2.86 Bought3
Assume a bond of salalah company is trading on Muscat security market at 1850 OMR, and paying 0.214 annual coupon rate. The bond has 2,500 OMR face value and 14 years maturity. What is the current yield of this bond? Select one: a. 0.2140 O b. 0.2892 O c.0.1584 O d. All the given answers in this question are wrong
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Annual Coupon rate = 0.214 | Current Bond Price = OMR 1,850
Face Value of Bond = OMR 2,500 | Time to maturity = 14 years
Annual Coupon = Coupon rate * Face Value = 2,500 * 0.214 = 535 OMR
Current Yield of the bond = Annual Coupon / Current Bond Price = 535 / 1,850
Hence, Current Yield of the bond = 0.2892 which is Option (b) among given choices.
