Calculate the current yield on the described bond.
A ​$500 Treasury bond with a coupon rate of 2.3​% that has a market value of ​$475

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

\[
\text{Current Yield} = \frac{\text{Annual Coupon Payment}}{\text{Market Value of the Bond}}
\]

### Step-by-Step Calculation:

1. **Coupon Rate**: The bond has a coupon rate of 2.3%, meaning the bond pays 2.3% of its face value annually.
   
   \[
   \text{Annual Coupon Payment} = 2.3\% \times 500 = \frac{2.3}{100} \times 500 = 11.5
   \]

   So, the annual coupon payment is **$11.50**.

2. **Market Value of the Bond**: The bond currently has a market value of **$475**.

3. **Current Yield Calculation**:
   
   \[
   \text{Current Yield} = \frac{11.5}{475} \approx 0.0242 \text{ or } 2.42\%
   \]

### Final Answer:
The current yield on the bond is **2.42%**.

Would you like further clarification or details on this? 

Here are five related questions to consider:
1. How does current yield differ from yield to maturity?
2. What is the impact of bond price fluctuations on current yield?
3. How does the coupon rate affect the overall return on bonds?
4. What factors can influence the market value of a Treasury bond?
5. How does the current yield compare to the bond's coupon rate?

**Tip**: The current yield only considers the bond's interest payments and market price, not any capital gains or losses if the bond is held to maturity.

Calculate the current yield on the described bond: A $500 Treasury bond with a coupon rate of 2.3% that has a market value of $475.

Learn how to calculate the current yield of a $500 Treasury bond with a 2.3% coupon rate and a market value of $475. This problem covers bond yield calculation, using key finance concepts and percentage calculations. Suitable for advanced high school students or college-level finance learners.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation