Question

Asked Oct 21, 2019

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Brandt Corporation's 30-year bond has 10 years left until maturity. The 8% coupon bond has a par value of $1000 and pays interest semiannually. The bond currently sells for $1089.84.

What is the bond's current yield?

What is the bond's yield to maturity?

Step 1

Part 1:

We calculate the current yield by dividing the coupon payment by current price of the bond.

Step 2

Given that:

Face value is $1000 and the current value of the bond is $1089.84

Annual coupon rate is 8%, as the interest is paid semiannually, the semiannual coupon rate is 8% divided by 2 that is equal to 4%

Step 3

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