18 Molly earned dividends of 25 on the stock she purchased i

18. Molly earned dividends of $25 on the stock she purchased in question 17. What is the current yield? 19. A zero coupon bond of rate of return at maturity? trades at $9,777 for a $10,000 payment. What is the rate

Solution

Current yield= Annual income on bond/ current market price.

Rate of return on maturity= (face value/current market price)^(1/years to maturity) -1

Q18. Current market price is missing.

Q19.Years to maturity is missing.

For example- Suppose the annual bond income is $100 and Current market price is $800 and face value is $1000 in this case current yield is $100/$800 = 12.5 %

For example- Suppose face value of bond is $1000 and Current market price of bond is $250 and year to maturity is 2 so and bond are zero coupon bond then

Rate of return on maturity=( $1000/$250)^1/2-1=1%.