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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Investing in Fixed Income Securities (NISM XXI-A)

A bond with a face value of Rs 1,000 and a coupon of 9% per annum is trading at Rs 900. What is its current yield, to the nearest one decimal place?

The current yield is 10.0 percent. The annual coupon is Rs 90 (9 percent of face value Rs 1,000), and dividing it by the market price of Rs 900 gives 10 percent. The coupon rate stays at 9 percent.

  1. A9.0%
  2. B8.1%
  3. C10.0%Correct
  4. D11.1%

Explanation

Annual coupon = 9% x 1,000 = Rs 90. Current yield = 90/900 = 10.0%. Using face value as the base gives 9%, which is the coupon rate, not current yield. Dividing by 1,000 less discount gives other wrong values.

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