Formulas Flashcards
Current Yield
Annual interest / Price
When bond at a premium, the current yield will be?
LOWER
Nominal Yield
Annual interest
Accretion
(1,000 less price) / Years to maturity
Amortization
(Price - 1,000) / Years to maturity
The seesaw
Price > NY > CY > YTM > YTC > Par
When the price goes down, the seesaw goes
UP
When the price goes up, the seesaw goes
DOWN
When rates decrease, what risk is this?
Re-investment risk
What day of the month to muni bonds pay interest?
1st of month
If a trade settles on 1st of month, how much interest?
No accrued interest (flat)
How often do treasury notes pay interest?
semi-annually
How often do CMO’s pay interest?
Monthly
What is a negative yield curve?
When long-term yields are less than short-term yields
What is the effective yield, when called?
Yield to Call
