SIE Exam Question 952: Answer and Explanation

Question: 952

An investor purchased a 5-year bond that pays a 3.5% semiannual coupon payment. The bond is priced at $97 per $100 of par value. What is the bond's current yield?

• A. 3.50%
• B. 3.61%
• C. 7.22%
• D. 7.65%

Correct Answer: B

Explanation:

Current yield = Sum of coupon payments ÷ Market price

Current yield = ($100 × 0.035) ÷ $97 = 0.0361 = 3.61%