Question

Tim has a $5000 bond with a 4.6% coupon. Tim purchased this bond for $5195. What is the yield of this new bond

Answer 1

4.4%

Explanation:

APE X

Answer 2

0.67%

Explanation:

When Tim's bond matures, he will receive ...

$5000 + 4.6% × $5000 = $5230

As a fraction of his investment, this is ...

$4230/$5195 = 1.006737 = 1 + 0.67%

The yield for Tim is 0.67%.