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Consider the bond (newly issued, issued on Nov 2013) for a country A: Face value $10 million Coupon rate 4.3% If this bond is purchased (in April 2014) at $9.02 million, instead of $10 million, the yield would be: Group of answer choices same as 4.3% greater than 4.3% less than 4.3%

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tutorAnne

Answer: greater than 4.3%

Explanation:

Given that

Face Value = $10 million

Current Price = $9.02 million

Coupon Rate = 4.3%

Coupon Payment  per annum = $10million  x 4.3% = $430,000 annually

Current yield = Annual Coupon Payment ÷ Current price of the bond

Current Yield = $430,000 ÷ 9,020,000 = 0.0476 =4.76% which is greater than 4.3%