Answer:
The answer is 10.65 percent
Explanation:
We first find the curren price of the bond
N(Number of periods) = 4 years
I/Y(Yield to maturity) = 12 percent
PV(present value or market price) = ?
PMT( coupon payment) = $100 (10 percent x $1,000)
FV( Future value or par value) = $1,000.
We are using a Financial calculator for this.
N= 4; I/Y = 12; PMT = 100; FV= $1,000; CPT PV= -939.25
The market price of the bond is $939.25
Therefore, the current yield on this bond is 100/939.25
= 0.1065
Expressed as a percentage
10.65 percent
