Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85. What is the current yield?
Answer(s): B
5.88%. The current yield is the annual interest divided by the price. The bond will pay $50 of interest per year ($1,000 face amount times 5%). Dividing by the price of $850 equals 5.88%.
Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85. What is the yield to maturity using the “rule of thumb” method?
Answer(s): D
6.49%. Divide the discount from par value of $150 ($1,000 - $850) by the number of years to maturity (15) to determine the annual discount. Add the result of $10 to the annual interest ($50) to determine the total annual return. Divide the result of $60 by the average of the current price (85) and par (100). The result is 60 divided by 92.5, which equals 6.49%.
Which bond buyer index reflects the lowest average yield for municipal bonds?
Answer(s): C
the 11-bond index. This index is the highest quality index and thus reflects the lowest average yield.
What does the bond buyer placement ratio represent?
the amount of municipal bonds distributed weekly as a percentage of each week’s new issue accounts of more than $1 million. This is the definition of the ratio.
How much money is a concession of 3/8 worth for one municipal bond?
$3.75. Three-eighths of a $1,000 bond with a par price of 100.00 equals $3.75.
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