Skip to content

NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

A bond with a face value of Rs 1,000 carries a 9% annual coupon and is currently trading at Rs 900. What is its current yield?

The current yield is 10%. The annual coupon is Rs 90 (9% of the Rs 1,000 face value), and dividing it by the market price of Rs 900 gives 10%. Coupon rate uses face value, while current yield uses the market price.

  1. A9.00%
  2. B10.00%Correct
  3. C11.11%
  4. D8.10%

Explanation

Annual coupon = 9% x 1,000 = Rs 90. Current yield = coupon / market price = 90 / 900 = 10%. The 9% figure is the coupon rate on face value, not the current yield. The 8.10% figure wrongly applies 9% to the price of 900.

Did you get it right without looking?

One question tells you little. A timed set on Terminology in Equity and Debt Markets shows your real accuracy, how long you take and where you lose marks.

Practise Terminology in Equity and Debt MarketsFree diagnostic mock

More Terminology in Equity and Debt Markets questions