Personal Finance 1st Edition by Jack R. Kapoor

Exercise 33

Calculating Yields. Assume you purchased a high-yield corporate bond at its current market price of $850 on January 2, 2004. It pays 9 percent interest and will mature on December 31, 2013, at which time the corporation will pay you the face value of $1,000. (Obj. 5)

a. Determine the current yield on your bond investment at the time of purchase.

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b. Determine the yield to maturity on your bond investment.

Step 1 of 5

Current yield is determined by dividing the annual dollar amount of income generated by an investment by the investment’s current market value.