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Lorico [155]
4 years ago
8

Sweet Sue Foods has bonds outstanding with a coupon rate of 5.44 percent paid semiannually and sell for $1,930.36. The bonds hav

e a par value of $2,000 and 17 years to maturity. What is the current yield for these bonds
Business
1 answer:
tigry1 [53]4 years ago
6 0

Answer:

Current yield=5.6%

Explanation:

<em>The current yield is the proportion of the current price of a bond earned as annual  interest payment.</em>

<em>Current yield = annual interest payment/bond price</em>

<em>Annual interest payment = coupon rate × face value</em>

                                          = 5.44% × $2000

                                          = $108.8

Current yield

= annual interest payment/price

= $(108.8/1,930.36) × 100

= 5.6%

Note we used the annual interest payment nothwithstanding that interests are paid semi-annually

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