Math Word Problem

Question

Suppose that today, the current yield for a corporate bond is 7.1%. If the market price will go down by 19% tomorrow, compute the current yield after the decrease.

Round your answer to the nearest tenth of a percent. 

Answer 1

Today the yield for the bond = 7.1%

Tomorrow the value of the yield drops by 19%.

Thus tomorrow the value of the bond will be 100%-19% = 81% of what it's worth today.

The new value is 0.071 x 0.81 = 0.05751 = 5.8% rounded to the nearest 10th of a percent.