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Ethics and Mechanics

First, read the case Calculating & Disclosing Bond Yields: Ethics and Mechanics.

Be sure to read the Notes at the bottom of the case, including:

“The term “estimated yield” is essentially synonymous to the term “current yield.” Textbooks define current yield as the bond’s coupon payment divided by the current market value of the bond. Brokerage statements report what they term estimated yield, which is the client’s projected annual income from a series of bonds (i.e. aggregate coupon income) divided by the aggregate market value of those bonds.
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Additional readings (not required, but recommended by the case study’s author)

Financial Industry Regulatory Authority (FINRA) (2016), Bond Basis: Yields That Matter More. Retrieved from
Securities and Exchange Commission (SEC), General Information on the Regulation of Investment Advisers. Retrieved from
Zweig, J (2015, Oct. 30), “How Muni Bonds ‘Yield’ 4% in a 2% World”, The Wall Street Journal. Retrieved from
Second, answer the questions. In your initial response to the topic you have to answer all questions:

Examine the brokerage statement contained in the case. How would the stated “estimated yield” compare to the yield to maturity for an investor who purchased the bonds on the statement date at current market prices?
Are you concerned by the ethical behavior presented in the case? Describe the dilemma and explain what you would do. Justify your response.