- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 7. Yield and Yield Spread Measures for Fixed-Rate Bonds
- Subject 2. Other Yield Measures, Conventions, and Accounting for Embedded Options
CFA Practice Question
The current yield on a 6%, 10-year bond is 6.7%, and the yield to maturity is 7.5%. Why is there such a discrepancy between the two rates?
B. The yield to maturity considers all coupons and their timing while the current yield does not.
C. The yield to maturity considers all coupons, capital gains/losses and the reinvestment income while the current yield only considers coupons.
A. The current yield considers all coupons and their timing while the yield to maturity does not.
B. The yield to maturity considers all coupons and their timing while the current yield does not.
C. The yield to maturity considers all coupons, capital gains/losses and the reinvestment income while the current yield only considers coupons.
Correct Answer: C
User Contributed Comments 4
| User | Comment |
|---|---|
| tlydon007 | I don't understand this. Current Yield < YTM & Current Yield < Coupon Rate Is that mathematically possible? |
| Inaganti6 | Tell them what they want to hear. |
| khalifa92 | lol |
| agaller | Coupon rate = 6% Current Yield = 6.7% YTM = 7.5% Coupon<Current<YTM |