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What is a yield to maturity?
A yield to maturity is the internal rate of return on a bond held to maturity, assuming scheduled payment of principal and interest.
How does the yield to maturity change over time?
The yield to maturity of a bond generally decreases over time as the bond approaches its maturity date. This is because as the bond gets closer to maturity, the price of the bond tends to increase, which in turn lowers the yield to maturity.
Distinguish between current yield an yield to maturity of a fixed income security how are these yields calculated?
Current yield is equal to the annual interest payment divided by the market price. It is the actual yield an investor will receive (instead of what is stated). For example, if a bond has a stated rate of 5 percent, but is selling below par, the investor would receive more than a 5 percent return. If the bond is selling above par, the current yield is actually less than 5 percent. Yield to maturity is the total return an investor will receive if the security is held until the maturity date, which is all of the annual interest payments and the difference between the original price and the principal you will receive at maturity. This formula is much more complicated but there are websites that will do it for you. Try moneychimp.com which has a calculator for the current yield and YTM.
How is yield curve used in finance?
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.
What is the difference between yield to worst and yield to maturity in bond investing?
Yield to worst is the lowest possible yield an investor can receive on a bond, taking into account all potential scenarios. Yield to maturity, on the other hand, is the average return an investor can expect if they hold the bond until it matures.
If a coupon bond is selling at par does the current yield equal its yield to maturity?
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.
Does the yield to maturity represent the promised or expected return on the bond?
The yield to maturity represents the promised yield on a bond
Does the yield to maturity represent the promised or expected return on the bonds?
The yield to maturity represents the promised yield on a bond
What is the promised yield to maturity calculation assumes?
The promised yield to maturity calculation assumes
What is a yield to maturity?
A yield to maturity is the internal rate of return on a bond held to maturity, assuming scheduled payment of principal and interest.
How does the yield to maturity change over time?
The yield to maturity of a bond generally decreases over time as the bond approaches its maturity date. This is because as the bond gets closer to maturity, the price of the bond tends to increase, which in turn lowers the yield to maturity.
Will a bond's yield to maturity increase or decrease if a bond 's price increases?
as yield to maturity increases the bonds price decreases, because a higher yield to maturity means its riskier to investors
Yield to maturity vs yield to call?
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).
What will happen to yield to maturity when market yield increase?
increase
Distinguish between current yield an yield to maturity of a fixed income security how are these yields calculated?
Current yield is equal to the annual interest payment divided by the market price. It is the actual yield an investor will receive (instead of what is stated). For example, if a bond has a stated rate of 5 percent, but is selling below par, the investor would receive more than a 5 percent return. If the bond is selling above par, the current yield is actually less than 5 percent. Yield to maturity is the total return an investor will receive if the security is held until the maturity date, which is all of the annual interest payments and the difference between the original price and the principal you will receive at maturity. This formula is much more complicated but there are websites that will do it for you. Try moneychimp.com which has a calculator for the current yield and YTM.
Why does the yield on a discount security exceed the discount rate?
The yield on a discount security exceeds the discount rate because the yield reflects the total return an investor can expect upon maturity, which includes the difference between the purchase price and the face value. The discount rate, on the other hand, is simply the percentage reduction from the face value at which the security is sold. Since the yield accounts for the time value of money and the investment period, it typically appears higher than the nominal discount rate. This difference illustrates the actual profit an investor earns by holding the security until maturity.
Compute the current price of the bonds if the present yield to maturity is?
Compute the current price of the bond if percent yield to maturity is 7%
