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The issuer will call the bonds and issue new bonds to the maturity date.
Yield usually refers to yield to maturity. If a bond is trading at par it usually means the yield to maturity is equal to the coupon.
The yield to maturity represents the promised yield on a bond
The yield to maturity represents the promised yield on a bond
The promised yield to maturity calculation assumes
A yield to maturity is the internal rate of return on a bond held to maturity, assuming scheduled payment of principal and interest.
as yield to maturity increases the bonds price decreases, because a higher yield to maturity means its riskier to investors
Yield to maturity assumes that the bond is held up to the maturity date. This is a disadvantage. If the bond is a yield to call , it can be called prior to the maturity date. Thus, the ivestor should sell the callable bond prior to maturity if he expects that he will earn higer return by doing so (in other words when yeild to call is higher than held to maturity).
increase
Compute the current price of the bond if percent yield to maturity is 7%
A yield curve is a graph that shows the relationship between yield and maturity on bonds. The graph plots the time or maturity on the x-axis and the yield on the y-axis. The yield curve will show how the yield on the bond changes with varying maturities.
The longer the maturity cycle, generally the higher the yield. A three to five year cd will get the highest yield right now.