Consider a 30-year corporate bond with a $1,000 face value and a coupon rate of

Question

                                              Consider a 30-year corporate bond with a $1,000 face value and a coupon rate of 9%.                     

Calculate the current yield for this bond. Suppose the corporate bond has an initial price of $1,600 and its price increases to $1,650 next period. Carry your answer to three decimal places--e.g., 11.125%.

Find the coupon payment based on the coupon rate and face value. Then compute the current yield using the initial price and enter this value as your answer.

Explanation / Answer

Coupon payment is .09*1,000= 90

If price is 1,600 current yield is 90/1600= 5.625%

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