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Bonds issued by XYZ have a par value of $1000, were priced at $1,220.00 six months ago, and are priced at $1,140.00 today. The bonds pay semi-annual coupons and just made a coupon payment. If the bonds had a percentage return over the past 6 months (from 6 months ago to today) of -2.10%, then what is the current yield of the bonds today

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jepessoa

Answer:

9.54%

Explanation:

-0.021 = ($1,140 + D - $1,220) / $1,220

-$25.62 = -$80 + D

$54.38 = Dividend (semiannual)

current yield = annual dividends / current price

annual dividends = $54.38 x 2 = $108.76

current price = $1,140

current yield = $108.76 / $1,140 = 0.0954 = 9.54%

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