Question

Tim has a $5000 bond with a 4.6% coupon Tim purchased this bond for $5195 what is the yield of the new bond?

Answer 1

Answer:

yield of this new bond is 4.42%

Step-by-step explanation:

given data

bond  = $5000

coupon rate = 4.6%

purchased bond = $5195

to find out

yield of this new bond

solution

We get here first amount paid to the bond holder

amount paid = 4.6% × $5000

amount paid = $230

and

so Tim earned $230 on a bond that cost her $5195  

so yield of this new bond = $\frac{230}{5195} \times 100$

yield of this new bond = 4.42 %