Finra Series-7 Exam - Topic 5 Question 80 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 80
Topic #: 5

Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85 . What is the nominal yield?

A5.88%

B5.1%

C5.00%

Dcannot be determined

Show Suggested Answer

Suggested Answer: B

deductions from gross income to offset lower value of equipment. Depreciation is the deduction of costs for capital assets as their value declines.

by Daniel at Jan 24, 2024, 03:20 PM

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Franchesca

8 months ago

I thought municipal bonds were always a safe bet.

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Laticia

8 months ago

Wait, how can we be sure without more info?

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Willard

8 months ago

Definitely agree with you, Page!

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Page

8 months ago

I think it's actually higher than 5% because it's trading below par.

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Kimi

8 months ago

The nominal yield is 5% since that's the bond's stated rate.

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Fernanda

9 months ago

I feel like I saw a question where the answer was "cannot be determined," but that doesn't seem right here.

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Melynda

9 months ago

I practiced a similar question where the bond was at a discount, and I think that changes the yield to something higher than the coupon rate.

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Tijuana

9 months ago

I’m not entirely sure, but I think the market price affects the yield. I might need to calculate it differently.

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France

9 months ago

I remember that the nominal yield is usually just the coupon rate, so I think it might be 5%.

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Lea

9 months ago

Ah, I see what they're getting at. This is a good test of understanding the relationship between market price, coupon rate, and nominal yield.

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My

9 months ago

Hmm, this one seems a bit tricky. I'll need to review the formula for calculating nominal yield from the market price and coupon rate.

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Laurel

9 months ago

Okay, I think I can figure this out. The key is to find the nominal yield based on the market price of 85 and the 5% coupon rate.

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Cyril

9 months ago

No problem, this is straightforward. I just need to plug the values into the right formula and solve for the nominal yield.

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Robt

9 months ago

I'm pretty sure the default XFree86 config file is /etc/X11/XF86Config, so I'll go with option C.

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Lera

9 months ago

Okay, I've got this. The key is to add the test address to the IPMP interface, not the member interfaces. So the correct answer is B.

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Orville

10 months ago

I'm a little confused on this one. Is a bar chart or a line chart a better option to visualize the percentage data? I'll have to review the question again to make sure I understand it fully.

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Eveline

1 year ago

I'm with Rodolfo on this one. The nominal yield has to be higher than the coupon rate to account for the discount. A) 5.88% is the only answer that makes sense to me.

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Audrie

1 year ago

I'm not sure, but A) 5.88% does seem like the most logical choice.

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Lashandra

1 year ago

I think you're right, the nominal yield should be higher than the coupon rate. A) 5.88% makes sense.

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Wilda

1 year ago

I agree with you, A) 5.88% seems to be the correct answer.

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Haha, Yoko's got a point. Maybe the real answer is D) cannot be determined, because we don't know the actual coupon rate of the bond. For all we know, it could be 6% and the market price is just really low for some reason.

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Kendra

1 year ago

True, it's always important to consider all factors when calculating yields.

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Leanna

1 year ago

True, but without knowing the actual coupon rate, it's hard to say for sure.

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Pamella

1 year ago

But wouldn't it be safe to assume that the nominal yield is closer to the market price of 85?

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Mickie

1 year ago

That's a good point, but the market price does affect the overall yield of the bond.

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Nada

1 year ago

But wouldn't the nominal yield just be the coupon rate of 5% regardless of the market price?

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Jina

1 year ago

I think you're right, D) cannot be determined seems like the most logical choice.

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Hyun

1 year ago

I think you're right, D) cannot be determined seems like the most logical choice.

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Yoko

1 year ago

Wait, this is a trick question! Since I'm the one who bought the bond, the answer should be C) 5.00%. Why would I buy a bond with a higher yield than the coupon rate? That doesn't make any sense.

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Nieves

1 year ago

I'm pretty sure the answer is A) 5.88%. The nominal yield should be the coupon rate divided by the market price, which in this case is 5% / 0.85 = 5.88%.

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Rodolfo

1 year ago

Okay, let's think this through step-by-step. The bond is trading at a market price of 85, which means it's priced at a discount. The nominal yield should be higher than the coupon rate to account for the discount.

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