Interest rates and prices · Question 11 of 12
A bond with a 3% coupon trades at 96. What is the current yield?
1 answer is correct. Hard
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Answer
- C About 3.13%
Explanation
Current yield = coupon / price = 3 / 96 ≈ 3.125%. Because the price is below 100, the coupon yields slightly more than 3% relative to the purchase price. The yield to maturity is higher still, because the price gain up to 100 is added.