Explain why current yield changes even though the income from the coupon is constant.
Step 1
The level of a bond coupon is equal to its benefit in maturity if its purchase price is equal to its value. The equivalent amount of the bond is its face value or the stated amount of the bond at the time of issue, as determined by the issuing business. The bond profit on maturity and the return on the bond are assumed by the bondholder holding the bond to its full maturity. The refund rate is a temporary refund that includes not only the coupon value but also the price change. The current yield is the real yield that an investor can achieve. YTM can be defined as the level of return one will receive on a bond until maturity. If the bond is bought at a reduced face value, YTM will be higher than the current profit as the discount increases yield.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
