What is the yield on a corporate bond with a $1000 face value purchased at a discount price of $925, if it pays 6% fixed interes

Question

vivado [14]

2 years ago

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What is the yield on a corporate bond with a $1000 face value purchased at a discount price of $925, if it pays 6% fixed interes

t for the duration of the bond?

Mathematics

1 answer:

KengaRu [80] · Answer 1 · 2023-05-12T06:48:15+03:00

For a $1000 face value purchased at a discount price of $925, if it pays 6% fixed interest for the duration of the bond is the yield on a corporate bond mathematically given as

Yield = 6.5%

<h3>What is the yield on a corporate bond?</h3>

Generally, the equation for the interest paid is mathematically given as

Interest paid = value of bond x Interest rate

Interest paid = 1000 * 6%

Interest paid = 60

Therefore

Yield = Interest paid / Price paid

Yield = (60 / 925)x 100

Yield = 6.5%

In conclusion, the yield on a corporate bond is
Yield = 6.5%