Exam FM (Financial Mathematics) Rate Practice Questions
The free Exam FM (Financial Mathematics) questions that deal with rate, with answers and explanations. The full bank and the timed practice test cover every topic the exam asks about.
Question #4
A $1,000 par value bond is selling for $950 with a coupon rate of 6%. What is the current yield?
Correct answer: A
Explanation
Current yield = Annual coupon payment / Current market price = $60 / $950 = 6.32%.
Question #6
A perpetuity pays $200 annually, and its price is $2,500. What is the implied discount rate?
Correct answer: C
Explanation
The formula for the value of a perpetuity is Price = Cash Flow / Discount Rate, so Discount Rate = Cash Flow / Price = 200/2500 = 8.00%.
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