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stocks and bond

Abby Sane decided to buy corporate bonds instead of stock. She desired to have the fixed-interest payments. She purchased 9 bonds of Meg Corporation 11 3/4 9 at 90.00. As the stockbroker for Abby (assume you charge her a $9 commission per bond).

a) Calculate the total cost of the purchase. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total cost $=

(b) Calculate the total annual interest to be received. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total annual interest $=

(c) Calculate the current yield. (Round your answer to the nearest tenth percent. Omit the "%" sign in your response.)

Current yield %=


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Joy R. | Certified Teacher and Professional, Experienced ASVAB/AFCT InstructorCertified Teacher and Professional, Expe...
4.9 4.9 (14 lesson ratings) (14)

The problem with this question is that the coupon amount is not included. The coupon amount is the "interest rate" on the bond. The bond has a face value which is the "principle" on the loan to the corporation. I assume from this question that the face value is $90?

We would need to know the coupon amount and how often that is paid on the bond to the bond holder and the term of the bond.

For part a of the problem, if the face value of the bond is $90, then:

Total cost $= (9 X 90) + (9 X 9) = 891 for the purchase

But the remaining information can only be gathered if the remaining terms of the bond are included.