If a Bond Offers a Current Yield of 5% and a Yield

question 34

Multiple Choice

If a bond offers a current yield of 5% and a yield to maturity of 5.45%,then the:

• A) bond is selling at a discount.
• B) bond has a high default premium.
• C) promised yield is not likely to materialize.
• D) bond must be a Treasury Inflation-Protected Security.

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Definitions:

Sampling Distribution

The probability distribution of a given statistic based on a random sample, important in inferential statistics for making inferences about a population.

Population Variances

A measure of the dispersion or spread of the entirety of data points in a population.

Student-t

A distribution that looks similar to the normal distribution but has thicker tails, used especially in scenarios of small sample sizes.

Confidence Interval

A tract of values derived by statistical analysis of samples, thought to potentially include the value of a population parameter not yet known.