Question

If the dollar price of a municipal bond is 101 and, at that price, the basis is 6.10, the nominal yield is

Answer 1

The nominal yield will be greater than 6.10 if the basis is at 6.10.

What does nominal yield entails?

For the bonds trading at a premium, the nominal yield are always higher than the basis which is called YTM

Hence, the nominal yield will be greater than 6.10 if the basis is at 6.10.

Therefore, the Option B is correct.

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