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Wittaler [7]
3 years ago
6

Belinda Herrera purchased a $5,000 bond at the quoted price of 94.125. The bond paid interest at a rate of 6%. What is the annua

l yield?
Business
1 answer:
belka [17]3 years ago
4 0

Answer:

6.37%

Explanation:

Annual yield is the annual dividend yield of a bond.

Formula for annual yield = Annual dividend amount / Current price of the bond

Annual dividend amount = Annual interest rate * Face value

= 6% * $5,000

= <u><em>$300</em></u>

Current price = 94.125 means that the bond price is 94.125% of the Face value

Current price = 0.94125* 5000 = <u><em>$4,706.25</em></u>

Therefore, annual yield = 300/4,706.25 = 0.0637 or 6.37%

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