Which of the following bonds offers the highest current yield? a. A 8.70%, 20-ye

Question

Which of the following bonds offers the highest current yield? a. A 8.70%, 20-year bond quoted at 93.547 b. A 14.50%, 15-year bond quoted at 155.911. C. A 4.35%, 18-year bond quoted at 46.773. The current yield of the bond in part a is »%. (Round to two decimal places.) The current yield of the bond in part b is ?96. (Round to two decimal places.) The current yield of the bond in part c is [K. (Round to two decimal places.) Which of the three bonds offers the highest current yield? (Select the best answer below.) O A. O B. O C. The bond in part a has the highest current yield because it is held for the longest period of time. All of the above bonds have a current yield of approximately 9.30%. The bond in part b has the highest current yield because it has the highest coupon rate and the highest market value.

Explanation / Answer

Formula for Current Yield = Coupon /Quoted Price of Bond

a) Current yield of Bond = 8.70/93.547 = 9.30%

b) Current yield of Bond = 14.50/155.91 = 9.30%

c)Current yield of Bond = 4.35/46.773 = 9.30%

Option b is the correct option. All of the above have current yield = 9.30%

Best of Luck. God Bless

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