A $1,000 face value corporate bond paying 10% is due to expire in 10 years time. The bond is currently selling for $1,064.. You colleague, who has an opportunity cost of 9% yield, is interested in investing in this bond and is seeking advice from you as follows"

1. Your colleague wants to know the current yield on the bond

 What is it and why she wants to know this?

2. Your colleague wants to know the yield on the bond over the 10-year period

 What is it and why does your colleague want to know this?

3. In dollar terms and rounding to the nearest dollar, what is the maximum price your colleague is willing to pay?

4. Would she buy the bond? Why?

Answer rating: 100% (QA)

1 The current yield on a bond is calculated by dividing the annual interest payment by the current market price of the bond In this case the bond has a 1000 face value and pays a 10 annual interest wh... View the full answer