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IceJOKER [234]
3 years ago
15

Bourdon software has 10.6 percent coupon bonds on the market with 17 years to maturity. the bonds make semiannual payments and c

urrently sell for 108.1 percent of par. what is the current yield on the bonds?
Business
1 answer:
Nimfa-mama [501]3 years ago
8 0

The Current yield on the bonds are calculated as :

Current yield = Annual coupon payments/ Current price

Here, we assume the face value of the bond to be $1000

Annual coupon payments are 10.6% of the face value or 0.106*1000 = 106

Current price = 108.1% of the face value = 1.081* 1000 = 1081

Current Yield = 106/1081

Current Yield = 0.098057 = 9.8057%

Current Yield = 9.81% (Rounded to two decimals)

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