A corporate bond is quoted at a price of 98.96 and has a coupon rate of 4.8 percent, paid semiannually. What is the current yield?

Current yield = 0.04850444624 or 4.850444624% rounded off to 4.85%

Explanation:

The current yield is the yield of a bond provided by its interest or coupon payments as a percentage of its current price. The formula to calculate current yield is as follows,

Current Yield = Interest payment per year / Current price of the bond

As the bond is a semi annual bond, assuming that the par value is 100, the semi annual and annual interest or coupon payment will be,

Semi annual coupon = 100 * 0.048 * 6/12 = $2.4

Annual coupon payment = 2.4 * 2 = 4.8

Current Yield = 4.8 / 98.96

Current yield = 0.04850444624 or 4.850444624% rounded off to 4.85%

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