Question

Monica has a $1000 bond with a 5.5% coupon. Monica purchased this bond for $1025. What is the yield of this new bond?

Answer 1

Explanation:

5.4%

Answer 2

Annual return on the bond is 1000*0.055 = $55 per year

Yield = return/price = 55/1025 ≈ 0.0537 ≈ 5.4%