Malko Enterprises’ bonds currently sell for $1,020. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. What is their current yield? a. 6.40% b. 6.91% c. 6.62% d. 7.35% e. 8.46%
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The current yield of a bond is calculated by dividing the annual interest payment (the coupon) by the current market price of the bond and then expressing it as a percentage.
Given:
Annual coupon = $75
Current market price = $1,020
Current Yield = (Annual Interest Payment / Current Market Price) * 100
Current Yield = ($75 / $1,020) * 100
Current Yield = 7.35%
Therefore, the current yield of the Malko Enterprises’ bonds is d. 7.35%.