A bond is selling for 101. It matures in 3 months and pays a coupon of 2 at maturity (in addition to the face of 100). The effective annual yield is closest to: 1.00% 2.50% 4.00%

For the effective annual yield, you annualize the holding period yield: HPY = (P1 – P0 + D1) / P0 = (100 – 101 + 2) / 101 = 0.99% EAY = (1 + HPY)^4 – 1 = 4.02%

Question Of The Week - Quantitative Methods (3) - CFA Level 1

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- AdaptPrep
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  30 Jun 2018 at 7:39 pm
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  A bond is selling for 101. It matures in 3 months and pays a coupon of 2 at maturity (in addition to the face of 100). The effective annual yield is closest to:
  - 1.00%
  - 2.50%
  - 4.00%
- AdaptPrep
  Participant
  - Undecided
  04 Jul 2018 at 7:11 am
  Up
  10
  ::
  For the effective annual yield, you
  annualize the holding period yield:
  
  HPY = (P1 – P0 + D1) / P0 = (100 –
  101 + 2) / 101 = 0.99%
  
  EAY = (1 + HPY)^4 – 1 = 4.02%
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