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Malko Enterprises' bonds currently sell for [tex]$1,184. They have an 8-year maturity, an annual coupon of $[/tex]103.8, and a par value of $1,000. What is their current yield?

A. 8.47%
B. 8.77%
C. 7.87%
D. 7.57%
E. 8.17%



Answer :

GinnyAnswer
To determine the current yield of Malko Enterprises' bonds, follow these steps:

1. Understand the Key Variables:
- The bond's current market price: [tex]$1,184 - The bond's annual coupon payment: $[/tex]103.8
- The bond's par (face) value: $1,000

2. Current Yield Formula:
The current yield can be calculated using the formula:

[tex]\[ \text{Current Yield} = \left( \frac{\text{Annual Coupon Payment}}{\text{Current Market Price}} \right) \times 100 \][/tex]

3. Substitute the Known Values:
[tex]\[ \text{Current Yield} = \left( \frac{103.8}{1184} \right) \times 100 \][/tex]

4. Calculate the Result:
Perform the division first:

[tex]\[ \frac{103.8}{1184} \approx 0.08766891891891891 \][/tex]

Then, multiply by 100 to convert it to a percentage:

[tex]\[ 0.08766891891891891 \times 100 \approx 8.766891891891891\% \][/tex]

5. Final Answer:
Based on the calculation, the current yield of Malko Enterprises' bonds is approximately 8.77%.

Thus, the correct answer is:
[tex]\[ \boxed{8.77\%} \][/tex]

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