Skip to content

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

A bond with face value Rs 1,000 pays a 8% annual coupon and is purchased at Rs 800. What are its current yield and the nature of its pricing?

The current yield is 10% and the bond trades at a discount. The annual coupon is Rs 80 on face value Rs 1,000, and dividing it by the purchase price of Rs 800 gives 10%, while the price is below face value.

  1. ACurrent yield 10%, bond trades at a discountCorrect
  2. BCurrent yield 8%, bond trades at a discount
  3. CCurrent yield 10%, bond trades at a premium
  4. DCurrent yield 8%, bond trades at par

Explanation

Annual coupon = 8% of 1,000 = Rs 80. Current yield = 80/800 = 10%. Since price 800 is below face 1,000 it is at a discount. The 8% option wrongly uses coupon rate as the current yield.

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