Genova Corporation has a four year 10% annual coupon bond. The price of the bond is $956.12. The Yield to Maturity is 11.43%. What is the current yield on this bond?

Multiple Choice

9.38%

10.01%

10.46%

11.05%

11.43%

The current yield of a bond is calculated using the formula:

\[
\text{Current Yield} = \frac{\text{Annual Coupon Payment}}{\text{Current Bond Price}}
\]

### Given:
- Annual coupon rate = 10%
- Face value of the bond = $1,000 (standard assumption unless stated otherwise)
- Current bond price = $956.12

### Step 1: Calculate the annual coupon payment
\[
\text{Annual Coupon Payment} = \text{Coupon Rate} \times \text{Face Value}
\]
\[
\text{Annual Coupon Payment} = 10\% \times 1000 = 100
\]

### Step 2: Calculate the current yield
\[
\text{Current Yield} = \frac{100}{956.12} \approx 0.1046 = 10.46\%
\]

Therefore, the correct answer is **10.46%**.

Would you like a detailed breakdown or have any questions?

Here are 5 related questions to deepen understanding:
1. What is the difference between the current yield and yield to maturity?
2. How does the bond's price change when market interest rates change?
3. What is the impact of coupon payments on the yield to maturity of a bond?
4. Why might a bond sell at a discount, like in this example?
5. How would the current yield change if the bond's price increased?

**Tip:** Current yield only considers the coupon payment and not the time value of money or capital gains/losses, unlike yield to maturity.

Genova Corporation has a four year 10% annual coupon bond. The price of the bond is $956.12. The Yield to Maturity is 11.43%. What is the current yield on this bond? Multiple Choice: 9.38%, 10.01%, 10.46%, 11.05%, 11.43%

Learn how to calculate the current yield for a Genova Corporation bond with a 10% annual coupon rate, priced at $956.12. The solution involves using the current yield formula and provides a step-by-step breakdown. This problem is suitable for undergraduate finance students.

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