CFA Practice Question

There are 490 practice questions for this study session.

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?

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
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