SIE practice questioneasyYield Calculations - Current Yield
A bond with a $1,000 par value and a 6% coupon is selling for $1,050. What is its current yield?
- A5.71%✓ Correct answer
- B6.00%
- C6.30%
- D5.00%
Explanation
Why A — 5.71%
Current yield = (annual interest) ÷ (market price) = $60 ÷ $1,050 = 5.71%. 6.00% is the nominal rate, 6.3% and 5.0% are incorrect.
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