Discount Yield is an annualized percentage measure of a bond's return on investment when the bond is purchased at a discount. This is based on the face value of the bond and the time left to maturity.
Answer and Explanation: 1
The discount yield is 6.62%
Discount Yield = ((par value - purchase price) / par value) x (360 / days left to maturity]
Discount Yield = ((10,000 - 9,875) / 10,000)x (360 / 68)
Discount Yield = (125 / 10,000) x (5.2941)
Discount Yield = (.0125) x (5.2941)
Discount Yield = 6.62%
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fromChapter 6 / Lesson 7
Learn the definition of treasury bonds, understand their advantages and disadvantages, and explore U.S. treasury bond examples.