Answer :
2.5%
Step by Step Explanation:
Face value = $500
Coupon yield = 2%
Income earned on he bond each year is at the rate of 2%.
Annual coupon = $10
Current bond price = $400
Formula for current yield = [tex]\frac{Annual coupon amount}{Current bond price}[/tex]
= [tex]\frac{10}{400}[/tex] ×100
= 2.5%
Hence, the current yield is 2.5%
