CFA CFA Level 1 Question of the Week – Quantitative Methods

Question of the Week – Quantitative Methods

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  • AdaptPrep
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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
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    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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