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    Question

    A bond has a face value of ₹100, carries a coupon

    interest rate of 8%, and is currently trading in the market at ₹90. What is its current yield?
    A 8% Correct Answer Incorrect Answer
    B 8.5% Correct Answer Incorrect Answer
    C 9% Correct Answer Incorrect Answer
    D 9.5% Correct Answer Incorrect Answer
    E 10% Correct Answer Incorrect Answer

    Solution

    The formula for current yield is: Current Yield=(Annual Coupon Payment / Market Price )×100 • Annual interest (coupon payment) = 8% of ₹100 = ₹8 • Market price = ₹90 Current Yield=8/9 × 100 = 8.89% ≈ 9% Current Yield  Correct Answer: 9%

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