SIE practice questionmediumCurrent yield
A $1,000 par bond with a 4% coupon is currently trading at $800. What is its current yield?
- A6%
- B4%
- C5%✓ Correct answer
- D8%
Explanation
Why C — 5%
Current yield = annual interest ($40) / market price ($800) = 5%. 4% is the coupon rate. 6% and 8% are incorrect calculations.
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