The calculated value of the current yield for the bond is 5%.
Given,
Face (par) value - $1000
Coupon rate - 4%
Selling price of coupon rate - $800
Thus,
The current yield for the bond is given by:
= Coupon rate \ times par value
Current price of the bond
= (4% × $1000) ÷ $800
= $40 \ $800
= 5%
Value of the current yield for the bond is 5%.
The current yield is an investment's annual income divided by the current price of the security. Thus, this measure examines the current price of a bond, rather than looking at its face value. This is especially helpful for short-term investments.
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