1,001 Series 7 Exam Practice Questions For Dummies by Steven M. Rice

Author:Steven M. Rice
Language: eng
Format: epub
ISBN: 9781118891643
Publisher: Wiley
Published: 2014-11-25T08:04:32+00:00

Finally, to determine the current yield, use the following formula:

131. B. a premium

The easiest way for you to deal with questions like this is to set up a seesaw, like the following. The yields on the seesaw are always going to be in the same position. You just have to remember that higher numbers are raised up higher on the seesaw.

Note: PR = price of the bond, NY = nominal yield (coupon rate), CY = current yield, YTM = yield to maturity (basis), and YTC = yield to call.

The dashed line represents a bond trading at par value (normally $1,000). The NY is 4 percent, and the YTM is 3.30 percent. Because 3.30 percent is lower than 4 percent, you have to lower the right side of the seesaw. After you do this, the left side raises, and you can see that the bond would be trading at a premium to par value.

132. A. 4.76%

To find the yield, use this formula:

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