John buys a $1,000.00 bond that pays 6% annual interest at 75. What is John’s annual yield?

1 Answer

• The question can not be answered without knowing the number of years till the bond matures.

  $60.00 plus $250 divided by the number of years to maturity.

  Divide the result by 875 and you will have the yield to maturity on an annual basis.

  875 = the bond purchase price (75 or $750) plus the par value ($1000) divided by 2

  Source(s): Series 7 General Securities License holder