Cheryl wants to purchase a par value $500 bond from Agram Imports. Agram Imports bonds have a market rate of 102.114 and offer 8.1% interest. If Cheryl’s broker charges a commission of 2.5% of the market value of each bond sold, what is the current yield on Cheryl’s bond?

The bond’s annual interest is 8.1% of its $500 par value, or $40.50. Its market price is 102.114% of $500, which is $510.57, and the 2.5% commission is about $12.76. So Cheryl pays about $523.33 total, and the current yield is $40.50 ÷ $523.33 ≈ 0.077, or 7.7%. The correct choice is 0.077.

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