CFA Practice Question

There are 490 practice questions for this study session.

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.

User Contributed Comments 2

User Comment
Sp1993 Where does the 1034 come from, does anybody know? Thanks
tung semi-annual compounding, (1000 x 0.068 x 0.5)^2
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