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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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