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This is simply the percentage of interest to be paid on the bond periodically.a.Nominal Yieldb.Realized Yieldc.Yield to calld.Current Yield

Question

This is simply the percentage of interest to be paid on the bond periodically.

  • a. Nominal Yield
  • b. Realized Yield
  • c. Yield to call
  • d. Current Yield
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Solution

To determine the periodic interest paid on a bond, the correct term among the provided options is Current Yield.

Explanation:

  1. Nominal Yield: This is the interest rate stated on the bond, usually expressed as a percentage of the face value, but does not take into account the price paid for the bond.
  2. Realized Yield: This reflects the actual return on an investment, taking into account the income received and any capital gains or losses, often over a specific holding period.
  3. Yield to Call: This calculates the yield of a bond if it is called before maturity at the specified call date. This is useful for callable bonds.
  4. Current Yield: This is calculated by taking the annual coupon payment divided by the current market price of the bond, representing the income as a percentage of the purchase price.

Thus, for periodic interest, the Current Yield accurately represents the interest to be paid on the bond periodically based on its current price.

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