- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 5. Yield Measures for Fixed-Rate Bonds

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**CFA Practice Question**

The yield of a U.S. bond issue quoted on a bond-equivalent basis is 6.8%. The yield-to-maturity on an annual-pay basis is closest to ______.

A. 6.09%

B. 6.92%

C. 7.18%

**Explanation:**The yield on an annual-pay basis is calculated as: [(1,034)

^{2}- 1] = 6.92%.

The yield on an annual-pay basis is always greater than the yield on a bond-equivalent basis because of compounding.

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**User Contributed Comments**
2

User |
Comment |
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Sp1993 |
Where does the 1034 come from, does anybody know? Thanks |

tung |
semi-annual compounding, (1000 x 0.068 x 0.5)^2 |