2.6 Types Of Yields

Question 1

Nominal Yield, interest rate, or coupon rate is?

Answer 1

Percentage of par value received annually as payment for the loan

Bond coupon payments generally happen twice a year

Question 2

Discount bond

Answer 2

Your bond that sells below it’s par value

Question 3

Premium bond

Answer 3

A bond that is sold above it’s par value

Question 4

Current yield

Answer 4

A snapshot approximation of the return an investor might expect if he or she purchased a bond today and held it for a year

Question 5

Current Yield Formula

Answer 5

Current Yield = Coupon payment/current market price of bond

Question 6

Current yield is a measure of

Answer 6

Return on investment (ROI)

Question 7

Yield to maturity (YTM)

Answer 7

The anticipated yield of a bond that is bought and held to maturity

Question 8

(YTM) is equal to?

Answer 8

The Internal Rate of Return (IRR)

Question 9

Yield to Call (YTC)

Answer 9

The yield assuming that you only hold the security until it’s first call date

Question 10

Yield to Worst (YTW)

Answer 10

The lowest Yield of the (YTM), yield to ever possible CALL date, and yield to every possible PUT date.