Interpret Bond Yield Measures
Series 65 · Flashcards · Application
SERIES 65 · FLASHCARDS
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QUESTION
Compute the present value of
50
50
50
annually for
2
2
2
years at
5
%
5\%
5%
using the annuity PV factor.
QUESTION
Identify whether YTM is greater than, less than, or equal to coupon rate for a bond priced at
90
90
90
(par
=
100
=100
=
100
).
QUESTION
Find the current yield for a
4
%
4\%
4%
annual coupon bond priced at
102
102
102
(par
=
100
=100
=
100
).
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ANSWER
Current yield
=
4
102
≈
3
.92
%
\text{Current yield}=\frac{4}{102}\approx^3.92\%
Current yield
=
102
4
≈
3
.92%
. For a premium bond, current yield is below the coupon rate due to the elevated market price.
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