Finra Exam SIE Topic 6 Question 2 Discussion

Actual exam question for Finra's SIE exam

Question #: 2
Topic #: 6

[All SIE Questions]

An investor owns $10,000 par value of a municipal bond with the following rates:

4.0% coupon rate

5.0% current yield

4.5% yield to maturity (YTM)

6.5% tax-equivalent yield

What amount of interest should the investor expect to receive each year?

A$400

B$450

C$500

D$650

Show Suggested Answer

Suggested Answer: A

The annual interest on a bond is calculated based on the coupon rate and the bond's par value.

Coupon rate = 4.0%.

Annual interest = $10,000 (par value) 4.0% = $400.

A is correct because the coupon rate determines the annual interest.

B, C, and D are incorrect because they reflect incorrect calculations. The current yield, YTM, and tax-equivalent yield do not affect the bond's fixed coupon payments.

by Rickie at Feb 08, 2025, 03:28 PM

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Cathern

5 days ago

I think the answer is $450 (B)

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Thad

12 days ago

The coupon rate is clearly 4.0%, so the answer should be $400. Anything else is just nonsense.

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