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Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85 . What is the nominal yield?
Suggested Answer: B
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deductions from gross income to offset lower value of equipment. Depreciation is the deduction of costs for capital assets as their value declines.
38 comments · newest first
FR
Franchesca
11 months ago
I thought municipal bonds were always a safe bet.
LA
Laticia
12 months ago
Wait, how can we be sure without more info?
WI
Willard
12 months ago
Definitely agree with you, Page!
PA
Page
1 year ago
I think it's actually higher than 5% because it's trading below par.
KI
Kimi
1 year ago
The nominal yield is 5% since that's the bond's stated rate.
FE
Fernanda
1 year ago
I feel like I saw a question where the answer was "cannot be determined," but that doesn't seem right here.
ME
Melynda
1 year 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.
TI
Tijuana
1 year ago
I’m not entirely sure, but I think the market price affects the yield. I might need to calculate it differently.
FR
France
1 year ago
I remember that the nominal yield is usually just the coupon rate, so I think it might be 5%.
LE
Lea
1 year 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.
MY
My
1 year 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.
LA
Laurel
1 year 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.
CY
Cyril
1 year ago
No problem, this is straightforward. I just need to plug the values into the right formula and solve for the nominal yield.
RO
Robt
1 year ago
I'm pretty sure the default XFree86 config file is /etc/X11/XF86Config, so I'll go with option C.
LE
Lera
1 year 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.
OR
Orville
1 year 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.
EV
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.
AU
Audrie
1 year ago
I'm not sure, but A) 5.88% does seem like the most logical choice.
LA
Lashandra
1 year ago
I think you're right, the nominal yield should be higher than the coupon rate. A) 5.88% makes sense.
WI
Wilda
1 year ago
I agree with you, A) 5.88% seems to be the correct answer.
PA
Pamella
2 years ago
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.
KE
Kendra
1 year ago
True, it's always important to consider all factors when calculating yields.
LE
Leanna
1 year ago
True, but without knowing the actual coupon rate, it's hard to say for sure.
PA
Pamella
1 year ago
But wouldn't it be safe to assume that the nominal yield is closer to the market price of 85?
MI
Mickie
1 year ago
That's a good point, but the market price does affect the overall yield of the bond.
NA
Nada
1 year ago
But wouldn't the nominal yield just be the coupon rate of 5% regardless of the market price?
JI
Jina
2 years ago
I think you're right, D) cannot be determined seems like the most logical choice.
HY
Hyun
2 years ago
I think you're right, D) cannot be determined seems like the most logical choice.
YO
Yoko
2 years 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.
NI
Nieves
2 years 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%.
RO
Rodolfo
2 years 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.
LY
Lyda
1 year ago
B) 5.1%
WA
Walton
1 year ago
A) 5.88%
DO
Dominga
2 years ago
B) 5.1%
EM
Emelda
2 years ago
A) 5.88%
TI
Tish
2 years ago
I'm not sure, but I think it's C) 5.00%
RU
Rutha
2 years ago
I agree with Stefany, because the nominal yield is calculated by dividing the annual interest payment by the market price
ST
Stefany
2 years ago
I think the answer is A) 5.88%