Question

What is the yield on a corporate bond with a $1000 face value purchased at a discount price of $875, if it pays 6% fixed interest for the duration of the bond? yield = [?] %​

Answer 1

To calculate the yield on a corporate bond, we can use the formula:

Yield = (Annual Interest Payment / Purchase Price) * 100

In this case, the annual interest payment is 6% of the face value, which is $1000 * 6% = $60. The purchase price is $875.

Using the formula, we can calculate the yield:

Yield = ($60 / $875) * 100

Yield = 6.8571%

Therefore, the yield on the corporate bond is approximately 6.8571%.