Question

Malko Enterprises’ bonds currently sell for $1,050. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. What is their current yield?

Answer 1

Answer:

Current yield = 7.14%

Explanation:

As we know that: current yield = Annual coupon payment/Current market price of bond

                                    = 75/1050

                                    = 7.14%

this rate represents for an investor would expect to earn because face vale and market price of bonds differs so the investor much rely on that factor.