Please help! A bond yield with a face value of $1000 has a current yield of7% an
ID: 2770732 • Letter: P
Question
Please help! A bond yield with a face value of $1000 has a current yield of7% and a coupon rate of 8%. What is the bonds price? a 6 year Circular File bond pays interest of $80 annually andsells for $950. What are its coupon rate, current yield, and yieldto maturity? Please help! A bond yield with a face value of $1000 has a current yield of7% and a coupon rate of 8%. What is the bonds price? a 6 year Circular File bond pays interest of $80 annually andsells for $950. What are its coupon rate, current yield, and yieldto maturity?Explanation / Answer
Face Value (or) Par Value of theBond = $1,000
CurrentYield = 7%
CouponRate = 8%
BondsPrice = ?
Current Yield = Coupon Payment / Bond Price
0.07 = $80 / Bond Price
Bond Price = $80 / 0.07
Number of years to Maturity = 6 years
Interest payment =$80
Current Bond Price =$950
Coupon Rate = Coupon Payment / Face Value
= $80 / $1,000
Current Yield = Coupon Payment / Bond Price
Current Yield = $80 / $950
Yield to Maturity (YTM):
$950 = $80 * [1-1/(1+r)6] / r + $1,000 /(1+r)6
(YTM) r = 9.12% (Using YTM calculator)
Yield to Maturity (YTM) = 9.12%