Bond Yields
A bond with a 6% coupon is trading at $1,100. The current yield is:
Current yield = Annual Interest / Market Price. Annual interest is $60 (6% x $1,000 par). Current yield = $60 / $1,100 = 5.45%. Since the bond is at a premium, the current yield is less than the coupon rate.
Complete Analysis & Legal Rationale
Current yield = Annual Interest / Market Price. Annual interest is $60 (6% x $1,000 par). Current yield = $60 / $1,100 = 5.45%. Since the bond is at a premium, the current yield is less than the coupon rate.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.