Question

Suppose you buy a 6 percent corporate bond. The face value of the bond is $5,000, but you buy the bond at 92. What is the yield on this bond? (Calculate to one decimal place.)

Answer 1

Based on the coupon rate on this corporate bond and the face value, the yield on the bond is 15.2%.

What is the yield on this bond?

The number of periods is missing so we shall assume a maturity period of one year.

The rate can be found using an Excel worksheet or a financial calculator.

Using an Excel worksheet, the relevant function is the RATE function and the following details will be needed:

Nper = 1 year

Pmt = 6% x 5,000

= $300

Pv = (5,000 * 0.92)

= $4,600

Pv = -4600 because it should be negative.

Fv = $5,000

The yield you will get is 15.2% as shown in the attached image.

Find out more on bond yields at brainly.com/question/7967102.