Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

What is the current yield of an 8.15\% coupon corporate bond quoted at a price of 94.30?

8.15\%

7.68\%

7.90\%

8.64\%

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Verified step by step guidance

Step 1: Understand the concept of current yield. Current yield is calculated as the annual coupon payment divided by the current market price of the bond. It represents the return an investor would expect if they purchased the bond at its current price.

Step 2: Identify the annual coupon payment. The coupon rate is given as 8.15%. To find the annual coupon payment, multiply the coupon rate by the bond's face value (typically $100 unless otherwise stated). Use the formula:

Annual Coupon Payment = Coupon Rate \times Face Value

Step 3: Determine the current market price of the bond. The bond is quoted at a price of 94.30, which means its current market price is 94.30% of its face value. Convert this percentage into a decimal by dividing by 100:

Current Market Price = 94.30 / 100

Step 4: Calculate the current yield using the formula:

Current Yield = \frac{Annual Coupon Payment}{Current Market Price}

. Plug in the values for the annual coupon payment and the current market price obtained in the previous steps.

Step 5: Simplify the calculation to find the current yield. Ensure that the numerator (annual coupon payment) and denominator (current market price) are correctly substituted and divided to arrive at the current yield percentage.