A bond has a face value of 1000 and a 5 coupon rate its curr

A bond has a face value of $1,000 and a 5% coupon rate, its current price is $940, and it is expected to increase to $960 next year. The current yield is %. (Enter your response rounded to one decimal place)

Solution

Answer :

Current Yield = Annual Coupons/Current bond price

Annual coupons = 5% of 1000 = 50

Current bond price = 940

Current yield = 100/940 = 0.106382 = 10.6382% = 10.64%