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Finra Exam Series-7 Topic 5 Question 80 Discussion

Actual exam question for Finra's Series-7 exam
Question #: 80
Topic #: 5
[All Series-7 Questions]

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

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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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Eveline
22 days 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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Wilda
1 days ago
I agree with you, A) 5.88% seems to be the correct answer.
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Pamella
1 months 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.
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Nada
7 days ago
But wouldn't the nominal yield just be the coupon rate of 5% regardless of the market price?
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Jina
27 days ago
I think you're right, D) cannot be determined seems like the most logical choice.
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Hyun
1 months ago
I think you're right, D) cannot be determined seems like the most logical choice.
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Yoko
1 months 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 months 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
2 months 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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Lyda
9 days ago
B) 5.1%
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Walton
18 days ago
A) 5.88%
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Dominga
1 months ago
B) 5.1%
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Emelda
1 months ago
A) 5.88%
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Tish
2 months ago
I'm not sure, but I think it's C) 5.00%
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Rutha
2 months ago
I agree with Stefany, because the nominal yield is calculated by dividing the annual interest payment by the market price
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Stefany
2 months ago
I think the answer is A) 5.88%
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