Question

A 30 year $1,000 par 4 3/4% Treasury Bond is quoted at 95-11 - 95-15. The note pays interest on Jan 1st and Jul 1st. A customer buys 1 bond at the ask price. What is the current yield, disregarding commissions

Answer 1

4.98%

Step-by-step explanation:

Calculation for the current yield

First step

Since the the bond was purchased at 95 +15/32nds this means that we have to find the bond percentage.

Calculated as

Bond Percentage = 95 + 15/32nds

Bond percentage =95.46875%

Second step is to multiply the bond percentage by $1,000

95.46875% *$1,000

= $954.6875

The last step is to find the current yield

Current yield=$47.50 /$954.6875

Current yield = 4.98%

Therefore the current yield will be 4.98%