Chapter 20.II, Problem 23RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Calculate the annual interest and current yield of the following bonds.

Company |
Coupon Rate |
Annual Interest |
Market Price |
Current Yield |
||||||

23. | Blockbuster | 7.50 | 125.25 |

To determine

**To calculate:** The annual interest and current yield of a Blockbuster bond with a coupon rate of

Explanation

**Given Information:**

A Blockbuster bond with a coupon rate of

**Formula used:**

Steps to calculate the current yield of a bond:

Step

Step

Step

**Calculation:**

A Blockbuster bond with a coupon rate of

The annual interest can be calculated as,

Thus, annual interest is

The current market price can be calculated as a percent of the par value of

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