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Refer the table below:
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Maturity
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Coupon
|
Bid
Price
|
Asked
Price
|
Asked
Yield, %
|
|
2012
May 15
|
1.375
|
101:05
|
101:06
|
0.78
|
|
2013
May 15
|
3.625
|
106:31
|
107:01
|
1.23
|
|
2014
May 15
|
4.75
|
111:22
|
111:23
|
1.70
|
|
2020
May 15
|
8.75
|
144:17
|
144:19
|
3.44
|
|
2025
Aug 15
|
6.875
|
133:07
|
133:11
|
3.94
|
|
2030
May 15
|
6.25
|
128:25
|
128:27
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4.12
|
|
2040
May 15
|
4.375
|
100:28
|
100:29
|
4.32
|
|
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||||
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What
is the current yield of the 4.375% 2040 maturity bond? (Do not round intermediate calculations. Round your answer
to 2 decimal places.)
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Current yield
|
4.36
 % |
Explanation:
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The
bond pays a coupon of 4.375%, which means annual interest is $43.75. The bond
is selling for 100 29/32 = $1,009.0625. Therefore, the current yield is
$43.75/$1,009.0625 = 4.34%.
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