Question

What is the yield on a corporate bond witha $1000 face value purchased at a discount price of $900, if it pays 8% fixed interest for the duration of the bond? yield = [?]% Give your answer as a percent rounded to the nearest hundredth. Hint: yield = interest paid price paid​

Answer 1

The yield on the corporate bond would be calculated as follows:

Yield = (Interest Paid / Price Paid) * 100

In this case, the interest paid is 8% of the face value, which is $1000 * 8% = $80.

The price paid for the bond is $900.

Therefore, the yield would be:

Yield = ($80 / $900) * 100 = 8.89%

Rounded to the nearest hundredth, the yield on the corporate bond is approximately 8.89%.