Question

The dollar interest received divided by the market price of the bond is called the:________.

Answer 1

Answer:

C. Current yield

Explanation:

Investors oftentimes invest in government bonds or private investing and are paid interest either on annual basis, semi annually or quarterly basis. A bond is a debt instrument which is given in form of loan by investors to borrowers and pays interest to them in return. Usually, when a bond is to be issued, an issuing entity will be responsible for that, while also determining the duration of the bond, the interest rate applicable and the face value. The aforementioned remains the same irrespective of the changes in bond market.

The current yield of a bond measures how profitable a bond is in comparison to other bonds. This means that for each year investment, investors are able to know which of the bonds that bring in the greatest return. The current yield of a bond is calculated by ; annual coupon payment divided by current market value of the bond.