Answer: Current yield on the bond = 35.71%
Explanation:
Given that,
Annual interest rate printed on the face of a bond = 25 percent
the face value of the bond = $1,000
the current market price of the bond = $700
Therefore,
current yield on the bond = [tex]\frac{Annual\ interest\ rate\ on\ the\ face\ of\ the\ bond}{Current\ price\ of\ the\ bond} \times 100[/tex]
= [tex]\frac{0.25\times1000}{700} \times 100[/tex]
= 35.71 %
