If a Bond Sells for $1,050 and Pays $75 in Interest

question 54

Multiple Choice

If a bond sells for $1,050 and pays $75 in interest annually, what is its current yield?

• A)14 percent
• B)7.5 percent
• C)7.14 percent
• D)The current yield cannot be found without knowing the original purchase price.

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Definitions:

Standard Deviation

A measurement indicating the range of separation or variance among a set of data.

Mean

The arithmetic average of a set of numbers, calculated by adding all the numbers and dividing by the count.

Standard Normal Curve

A bell-shaped curve that is symmetric about the mean, showing the distribution of a standard normal variable where the mean is zero and the standard deviation is one.

Z-score

A statistic that measures the distance of a single data point from the mean, expressed in units of standard deviation.