To calculate the annual yield of a bond with no expiration date (often referred to as a perpetuity), you can use the formula for yield:
\[ \text{Yield} = \frac{\text{Annual Interest Payment}}{\text{Market Price}} \]
In this case:
- The face value of the bond is R10.00, and it pays a fixed interest rate of 10%. Therefore, the annual interest payment is:
\[ \text{Annual Interest Payment} = 10% \times \text{Face Value} = 0.10 \times 10 = R1.00 \]
- The market price of the bond is R14.00.
Now substituting these values into the yield formula:
\[ \text{Yield} = \frac{R1.00}{R14.00} \approx 0.0714 \text{ (or 7.14%)} \]
Thus, the annual yield of the bond is approximately 7.14%.