btcapital

Nominal yield = coupon rate. It has nothing to do with market price or require any calculation. A 6% bond has a nominal yield of 6%.

YTM = discount rate that equates the cash flows to the market price of the bond. It is equal to the coupon rate if and only if the bond is selling at par (KNOW THIS).

Current Yield = coupon/market price of the bond.

Edit: Rate and Yield are mostly interchangeable so nominal yield = nominal rate. I've never heard anyone say "rate to maturity" but it wouldn't surprise me if they talked that way in New Zealand or something.



Edited 1 time(s). Last edit at Wednesday, November 12, 2008 at 08:24AM by JoeyDVivre.

Beatnik

okay so Premium bond - Nominal Yield is on top, CY is in middle, YTM is on bottom.
Discount bond - YTM is on top, CY is in middle, Nominal yield is on bottom?

bapswarrior

Great thank u

dotamasta

YTM = Nominal Yield?
Current yield = coupon yield?

Finalnub

B. because current yield( current coupon/current price in this case above par value) is going to be less than YTM.

chetan86

I said B too the answer is D tho. I hate getting easy questions like this wrong

draz

It's because your current yield need to be in the middle of the coupon and YTM for a discount bond

and Coupon is always less than YTM for a discount