Question

A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent. What is the current market price?

a. $4,067.47
b. $1,011.82
c. $989.18
d. $3,933.43
e. $975.18

Answer 1

$975.18

Step-by-step explanation:

The computation of the current market price is shown below:

The Current yield is

= Annual coupons ÷ Market price

= $1,000 × 5.5% ÷ 5.64%

= $55 ÷ 5.64%

= $975.18

Hence, the current market price is $975.18 and the same is to be considered

We simply applied the above formula so that the correct value could come

Therefore the correct option is e.