Study Question of the Week: July 2, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 51, Series 52, Series 53, and Series 62. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 7Series 51Series 52Series 53, and Series 62): 

A flat bond is a bond that:

Answers:

A. Has a fixed interest rate

B. Is quoted in terms of its yield-to-maturity

C. Has no call provision

D. Does not trade with accrued interest

Correct Answer: D. Does not trade with accrued interest

Rationale: Bonds are quoted at a flat price, also called a clean price, meaning that accrued interest is not factored into the quotation. Bonds generally trade at a “dirty” price, with accrued interest factored in. Sometimes bonds trade flat, however, meaning that the bond carries no accrued interest. Bonds in default and zero coupon bonds are two examples of bonds that trade flat.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

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