Yoko's aunt ask's her to to analyze Bond XYZ: Bond Face Value = $1000 Coupon = 12%, paid annually Maturity = 8-years Bond Price = $1047.37. Yoko tells her Aunt that the Current Yield of the bond is 12.52%. Is Yoko's statement true or false?

Yoko's aunt ask's her to to analyze Bond XYZ: Bond Face Value = $1000 Coupon = 12%, paid annually Maturity = 8-years Bond Price = $1047.37. Yoko tells her Aunt that the Current Yield of the bond is 12.52%. Is Yoko's statement true or false?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6FPE

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Question

Yoko's aunt ask's her to to analyze Bond XYZ:

Bond Face Value = $1000

Coupon = 12%, paid annually

Maturity = 8-years

Bond Price = $1047.37.

Yoko tells her Aunt that the Current Yield of the bond is 12.52%.

Is Yoko's statement true or false?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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