Whether the bid yield would be larger than the ask yield Introduction: Bid price refers to the price that an investor would be willing to pay to buy the security. Ask price refers to the price that a dealer would be ready to accept in exchange for the sale of bond or security instrument. Yields refer to the return on the investment made by an investor. A bond yield refers to the return earned by the investor on the bond, if he or she holds the bond until the bond matures. Bid yield refers to the yield that the investor would achieve from a bond instrument if he or she purchases the bond at the bid price and holds the bond until it matures. Ask yield refers to the yield that the investor would achieve from a bond instrument if he or she purchases the bond at the ask price and holds the bond until it matures.

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Chapter 7, Problem 4CRCT

Summary Introduction

To discuss: Whether the bid yield would be larger than the ask yield

Introduction:

Bid price refers to the price that an investor would be willing to pay to buy the security. Ask price refers to the price that a dealer would be ready to accept in exchange for the sale of bond or security instrument.

Yields refer to the return on the investment made by an investor. A bond yield refers to the return earned by the investor on the bond, if he or she holds the bond until the bond matures.

Bid yield refers to the yield that the investor would achieve from a bond instrument if he or she purchases the bond at the bid price and holds the bond until it matures. Ask yield refers to the yield that the investor would achieve from a bond instrument if he or she purchases the bond at the ask price and holds the bond until it matures.

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