CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

The bond-equivalent yield of an annual-pay bond is always less than that of an annual-pay rate because ______

A. the annual-pay bond is divided by two for the semi-annual equivalent.
B. the annual-pay bond will pay twice as much interest in one payment.
C. the bond-equivalent yield compounds only half as often for the annual-pay bond.
D. the square root of the annual-pay yield is taken to convert from one to two pay periods in a year and maintain the same yield when the two periods are compounded back to an annual basis.
Correct Answer: D

User Contributed Comments 6

User Comment
mrushdi Can any one explain pls?
dah62 Not sure as I got bored (=confused ;-) ) by about half way through the second line of D. The others were all wrong though so used process of elimination!!!
gracecfa haha same here :D
gill15 Just because the first three make NO sense...then you know D is correct...

A) annual pay yield is Multiplied by 2 not divided
B)Thats just dumb
C) Same as B
davcer D simply describes the way in which you get the BEY
CJPerugini ^ nice
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