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Chapter 3
Question 2
Yields on bonds
Consider a bond with characteristics as follows:
Nominal value $100
Coupon rate 6%
Current market value $105.79
Calculate the running yield (interest yield) on the bond.
Interest yield = annual interest/market value × 100
Annual interest is calculated by multiplying the nominal value of the debt by the
coupon rate.
Annual interest = $100 × 6% = $6
Interest yield = $6/$105.79 × 100 = 5.67%
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