Using Bond Quotes [LQ2] Suppose the following bond quotes for IOU Corporation ap

Question

Using Bond Quotes [LQ2] Suppose the following bond quotes for IOU Corporation appear in the financial page of today's newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2015. What is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the current yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

YTM = ((7% x 2,000) + ((2,000-104.26)/14))/((2,000+104.26)/2)x 100
    = (140 + 135.41)/1052.13 x 100
    = 26.18%
Current Yield = (7% x 2,000)/ 104.26 x 100
              = 134.28%

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