An investor pays $1,132 for a bond. The bond has a Face Value of $1,000.00 and an annual coupon rate of 4%. What is the current yield on this bond?

The **current yield** of a bond is calculated by dividing the annual coupon payment by the price paid for the bond.

The formula is:
\[
\text{Current Yield} = \frac{\text{Annual Coupon Payment}}{\text{Price Paid for the Bond}} \times 100
\]

### Step-by-step solution:

1. **Annual Coupon Payment**:
   The coupon rate is 4%, and the face value of the bond is $1,000.
   \[
   \text{Annual Coupon Payment} = \frac{4}{100} \times 1,000 = 40
   \]
   So, the bond pays $40 in interest annually.

2. **Price Paid for the Bond**:
   The investor paid $1,132 for the bond.

3. **Current Yield**:
   \[
   \text{Current Yield} = \frac{40}{1,132} \times 100 = 3.53\%
   \]

### Answer:
The current yield on this bond is **3.53%**.

Would you like further details or have any other questions?

Here are 5 related questions to think about:
1. How does the coupon rate compare to the current yield in this case?
2. What happens to the current yield if the price of the bond increases?
3. How does a bond's current yield differ from its yield to maturity?
4. What would the current yield be if the bond was purchased at face value?
5. What factors could influence the market price of a bond?

**Tip**: Current yield doesn't take into account capital gains or losses if the bond is held to maturity; that's why **yield to maturity** is a more comprehensive measure.

Learn how to calculate the current yield of a bond where an investor pays $1,132, the face value is $1,000, and the annual coupon rate is 4%. This step-by-step guide includes key finance concepts and formulas. Suitable for advanced high school or college students.

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