N = 12; I/YR = 9.5; PMT = 85; FV = 1000; and then solve for PV = -$930. VB = $930.
79. Current yield Answer: c Diff: E
The current yield is equal to the annual coupon divided by the price. The annual coupon is given: 0.08 $1,000 = $80. You need to find the price before calculating the current yield.
Step 1: Using the
TVM inputs of your calculator, find the bond’s price:
N = 15; I = 7; PMT = 80; FV = 1000; and then solve for PV =
-$1,091.08. V
B = $1,091.08.
Step 2: Calculate the bond’s current yield:
Current yield = Annual coupon/Current price
Current yield = $80/$1,091.08
= 7.33%.
80
. Current yield and yield to maturity Answer: b Diff: E
Current yield is calculated as: $80/$985 = 8.12%.
N = 12; PV = -985; PMT = 80; FV = 1000; and then solve for I/YR (YTM) = 8.20%.
