- StudyBlue
- Arkansas
- University of Arkansas - Fayetteville
- Economics
- Economics 2013
- Le Blanc
- Bond Yield Calculations

Allen M.

Nominal yield is ____.

The interests stated on the face of a bond which is sometimes referred to as the coupon rate. 1/26

Another name for nominal yield is ____.

Coupon rate.

The nominal yield/coupon rate is the interest rate stated on the face of the bond.

This tells you how much interest the bond will pay per year. 2/26

The nominal yield/coupon rate is the interest rate stated on the face of the bond.

This tells you how much interest the bond will pay per year. 2/26

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A bond that is purchased for $1,004 in 2012 with a nominal yield of 4% will pay a dividend in the amount of ____ in 2012?

$40

Remember all bonds have a**$1,000** face value at time of issue, regardless of whether the bond was purchased at a premium, like in this example, the bond will still be based off of face value. The nominal yield is also known as the coupon rate and would be determined by multiplying the face value of the bond times the nominal yield/coupon rate ($100 x .04 = $4). 3/26

Remember all bonds have a

Current yield is ____?

The annual rate of return on a security.

It is calculated by dividing the interest (or dividends paid) by the securities current market price. 4/26

It is calculated by dividing the interest (or dividends paid) by the securities current market price. 4/26

Current yield is calculated by ____.

Dividing the current interest payment (or current dividend payment) by the investment price.

__Current interest __

Investment price

Investment price

When a bond is selling for a price ____ par/face value it is said to be trading at a premium.

Above

If you pay more you get less

If you pay less you get more

If you pay more you get less

If you pay less you get more

When a bond is selling for a price ____ par/face value it is said to be trading at a discount.

Below

If you pay more you get less

If you pay less you get more

If you pay more you get less

If you pay less you get more

If an investor buys a bond at a premium, he will always receive a rate of return ____ than the coupon rate (or nominal yield) stated on the face of the bond.

Less

Any time an investor purchases a bond at a discount, he will always get ____ than the rate stated on the face of the bond (ie - nominal yield).

More

The yield to maturity is also known as the ____?

True Yield

This measurement takes into account to gain or loss (due to purchasing at a premium or discount) the investor will have when the bond is redeemed at maturity.

The return (ie - total percentage) that the bond holder will earn on the bond based on its current market price if the bond holder holds the bond until maturity (and receives the par value of $1,000).

This measurement takes into account to gain or loss (due to purchasing at a premium or discount) the investor will have when the bond is redeemed at maturity.

The return (ie - total percentage) that the bond holder will earn on the bond based on its current market price if the bond holder holds the bond until maturity (and receives the par value of $1,000).

The bond call ABC 5s35 @106 means the nominal yield is?

5% nominal yield (or coupon rate)

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The bond call ABC 5s35 @106 means the maturity date is....

35 years

The bond call ABC 5s35 @106 means the the price of the bond is....

$1,060

Remember each point is $10 ($10 x 106 points = $1,060).

Remember each point is $10 ($10 x 106 points = $1,060).

Which is the correct way to state a bond?

101-1/4

101.25

101-1/4

101.25

101-1/4

Bond calls are done in FRACTIONS not with decimal points.

Bond calls are done in FRACTIONS not with decimal points.

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