Answered

At IDNLearn.com, find answers to your most pressing questions from experts and enthusiasts alike. Get accurate and detailed answers to your questions from our dedicated community members who are always ready to help.

What is the yield on a corporate bond with a $1000
face value purchased at a discount price of $875, if
it pays 8% fixed interest for the duration of the
bond?
yield = [ ? ] %
Give your answer as a percent rounded to the nearest
hundredth
Hint: yield = interest paid
price paid

Sagot :

Lanuelidn

Based on the calculations, the yield on this corporate bond is equal to 9.14%.

What is yield?

Yield can be defined as a measure of the income returned or earned from an investment such as the interest earned from holding a corporate bond.

Mathematically, the yield on an investment can be calculated by using this formula:

Yield = Interest paid/Price paid

However, we would need to determine the interest paid as follows:

Interest paid = value of bond × Interest rate

Interest paid = 1000 × 0.08

Interest paid = $80.

Substituting the given parameters into the formula, we have;

Yield = Interest paid/Price paid

Yield = 80/875 × 100

Yield = 9.14%.

Read more on yield here: https://brainly.com/question/27531875

#SPJ1

We are happy to have you as part of our community. Keep asking, answering, and sharing your insights. Together, we can create a valuable knowledge resource. Thank you for choosing IDNLearn.com. We’re committed to providing accurate answers, so visit us again soon.