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%
What is the yield on a corporate bond?
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%
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