Question

Suppose you buy a $10,000 bond at face value. The bond pays $450 annual interest. What is the yield on this bond? (Calculate to one decimal place)

HELP ASAP

Answer 1

Yield on this bond = 4.5%

Explanation:

Given:

Face value of bond = $10,000

Annual interest receives from bond = $450

Find:

Yield on this bond

Computation:

Yield on bond = [Annual interest / Face value]100

Yield on this bond = [Annual interest receives from bond / Face value of bond]100

Yield on this bond = [450 / 10,000]100

Yield on this bond = [0.045]100

Yield on this bond = 4.5%