To calculate the current yield of a bond, we use the formula:

$\text{Current Yield} = \left( \frac{\text{Annual Coupon Payment}}{\text{Current Price of the Bond}} \right) \times 100\%$

Given:

• The original bond coupon rate is $6 \frac{1}{2}\%$ or $6.5\%$.
• The face value of the bond is usually $100$ (assuming it's a standard bond).
• The current price Jorge paid for the bond is $110$.

Steps to Calculate:

1. Calculate the Annual Coupon Payment: $\text{Annual Coupon Payment} = \left( \frac{6.5}{100} \right) \times 100 = 6.5 \text{ dollars}$

2. Determine the Current Yield: $\text{Current Yield} = \left( \frac{6.5}{110} \right) \times 100\% \approx 5.91\%$

Answer:

The current yield of the bond is approximately 5.9%.

Do you want details or have any questions about this calculation?

---

Related Questions:

1. What is the difference between current yield and yield to maturity?
2. How does the bond's price affect its current yield?
3. What factors might cause the price of a bond to increase?
4. How do you calculate the yield to maturity of a bond?
5. What is the impact of interest rates on bond prices?
6. What does a current yield indicate about a bond's performance?
7. How do coupon payments affect the overall yield of a bond?
8. What are the risks associated with investing in bonds?

Tip: Always consider both current yield and yield to maturity when evaluating bond investments to understand potential returns better.