Practice Quiz

FINRA Series 7

Category - Series 7

Start a Study Session Sign up for Question of the Day
Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85. What is the yield to maturity using the “rule of thumb” method?
  1. 5.00%
  2. 5.88%
  3. 5.10%
  4. 6.49%
Explanation
Answer: D - 6.49%. Divide the discount from par value of $150 ($1,000 - $850) by the number of years to maturity (15) to determine the annual discount. Add the result of $10 to the annual interest ($50) to determine the total annual return. Divide the result of $60 by the average of the current price (85) and par (100). The result is 60 divided by 92.5, which equals 6.49%.
Was this helpful? Upvote!
Login to contribute your own answer or details
Start a Study Session Sign up for Question of the Day

Top questions

Related questions

Most popular on PracticeQuiz