December Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Congratulations to Jason W., this month’s Study Question of the Month winner!

Question

Relevant to the SIE, Series 6Series 7, Series 52, Series 62, Series 65, Series 66,  Series 79, and Series 82.

 

 

 

 

 

Juan has a bond with a YTM of 6.3%. He bought the bond for $1050. Which of the following is true?

I.  His current yield will be greater than his YTM

II.  His current yield will be less than his YTM

III.  His nominal yield will be greater than his YTM

IV.  His nominal yield will be less than his YTM

 

A.  I and III

B.  I and IV

C.  II and III

D.  II and IV

Answer: A.

For bonds that are purchased at a premium and held to maturity, the order of the yields from highest to lowest is nominal yield, current yield, YTM and YTC.. For bonds that are purchased at a discount, the opposite order is true (YTC > YTM > current yield > nominal yield).

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