Which yield measure is considered a crude measure because it ignores the time value of money and capital gains?
Explanation
Current yield looks only at the immediate cash flow relative to price, neglecting the full maturity structure.
Other questions
What does the Yield to Maturity (YTM) of a fixed-rate bond represent?
Which of the following assumptions is required for an investor to earn the calculated Yield to Maturity (YTM)?
What is the relationship between a bond's price and its Yield to Maturity (YTM)?
The full price of a bond is calculated as:
Why are bond prices typically quoted as the 'flat price' rather than the 'full price'?
What is 'Matrix Pricing' primarily used for?
When using matrix pricing, how is the yield for a specific maturity usually derived if an exact match is not available?
What is the 'periodicity' of a bond yield?
A bond yield of 4 percent quoted on a semiannual bond basis represents an annual yield of:
Which day count convention is typically used for corporate bonds?
What is the 'Government Equivalent Yield' (GEY) used for?
What is the 'Current Yield' of a bond?
The yield-to-worst is defined as:
What is an 'Option-Adjusted Yield'?
If a bond has a 'Quoted Margin' greater than its 'Required Margin', the bond will trade at:
What is a 'G-Spread'?
Which spread measure is calculated over a swap rate benchmark?
The 'Z-Spread' (Zero-volatility spread) is the constant spread added to:
How is the Option-Adjusted Spread (OAS) calculated in relation to the Z-Spread?
Which of the following is true regarding money market yields compared to bond yields?
A Treasury Bill is quoted on a 'discount rate basis'. What is the denominator in the discount rate calculation?
Which instrument is typically quoted on an 'add-on rate basis'?
What is the convexity effect in bond pricing?
If a bond is trading at a discount, what is the relationship between its price and par value over time (assuming constant YTM)?
Calculate the price of a 10 percent annual coupon bond with 3 years to maturity and a YTM of 12 percent (Face Value = 100).
A zero-coupon bond is issued at 90 with a maturity of 4 years. What is the approximate annual YTM?
Which bond has the greatest sensitivity to interest rate changes (highest duration)?
If a bond's price is 980 and the face value is 1000, it is trading at:
In a 30/360 day count convention, how many days are there between February 1 and March 1?
A corporate bond yields 6 percent on a 30/360 basis. What is its Government Equivalent Yield (GEY) if the conversion factor is 365/360?
Calculate the value of a bond with the following spot rates: Year 1: 5 percent, Year 2: 6 percent. The bond pays a 5 percent annual coupon and matures in 2 years (Face Value 100).
What is the 'Par Rate'?
Which of the following describes an 'upward sloping' yield curve?
A '3y1y' forward rate refers to:
What is 'reinvestment risk'?
For a buy-and-hold investor, which risk is most relevant?
If a bond's 'Macaulay Duration' equals the investor's investment horizon, what is the 'Duration Gap'?
What does a negative Duration Gap (Horizon > Macaulay Duration) imply about the dominant risk?
Which of the following converts a 30-day money market yield of 0.5 percent to a bond equivalent yield (BEY)?
For a 'Floating-Rate Note' (FRN), if the credit quality of the issuer declines, what happens to the 'Required Margin'?
The 'Discount Margin' on a floating-rate note is essentially:
Which calculation gives the 'Add-on Rate' (AOR) for a money market instrument?
If a 90-day commercial paper is quoted at a discount rate of 2 percent (360-day year), the approximate add-on rate (365-day year) is:
A 'step-up' coupon bond is one where:
Which convention assumes a year has 365 days?
Calculate the accrued interest for a bond with a 6 percent annual coupon (30/360) if 30 days have passed since the last coupon payment (Face Value 100).
If the term structure of interest rates is flat at 5 percent, what is the value of a 3-year 5 percent annual coupon bond?
Which yield curve shape assumes that short-term rates are higher than long-term rates?
Which of the following bond types typically has the highest 'Periodicity' in its yield quotation?