Question

Stuart Software has 5.7 percent coupon bonds on the market with 11 years to maturity. The bonds make semiannual payments and currently sell for 93 percent of par. What is the current yield on the bonds

Answer 1

current yield = 6.13%

Step-by-step explanation:

Given:

The software has 5.7 percent coupon bonds

maturity=11 years

current sell=93 percent of par

The objective is to find the current yield on the bonds

Formula used:

Current yield =
`(Annual Coupon payment)/(current selling price)*100`

Solution:

Current selling price=93% of 1000=930

Annual coupon payment= 5.7% of 1000=57

Then,

On substituting the values in the formula,

Current yield =
`(57)/(930)`*100

On Simplifying,

Current yield =6.13%

Therefore,

Current yield =6.13%