- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 7. Yield and Yield Spread Measures for Fixed-Rate Bonds
- Subject 2. Other Yield Measures, Conventions, and Accounting for Embedded Options
CFA Practice Question
Which statement regarding the comparison between the true yield and the street convention yield is CORRECT?
B. The street convention yield can never be higher than the true yield.
C. The true yield and street convention yield can never be equal.
A. The true yield can never be higher than the street convention yield.
B. The street convention yield can never be higher than the true yield.
C. The true yield and street convention yield can never be equal.
Correct Answer: A
The true yield can never be higher than the street convention yield because weekends and holidays delay the time to payment. The yields should be equal if the payment date is a non-holiday weekday.
User Contributed Comments 2
| User | Comment |
|---|---|
| chester21 | Because of the effect of accrued interest |
| fabsan | you wrong chester21. The True yield include all days (weekend and holiday) in a single year. But, the street conv yield only take business days. If I say, I made 2% on 365 days (true yield) and you said you made 2% on 255 days (because you only take into account the business days); if we were to compare our 2 performances, you will always make more. |