Question

Which of the following describes the most significant technical difference between the Current Yield and the Yield to Maturity (YT

Q: Answer-Which of the following describes the most significant technical difference between the Current Yield...

Current Yield is calculated by dividing the annual coupon by the current market price, ignoring the time value of money and the eventual gain or loss on principal. Conversely, YTM is a more comprehensive measure that reflects the total return anticipated if the bond is held until maturity, incorporating the current price, par value, coupon payments, time to maturity, and the assumption that all coupons are reinvested at the same rate.

M of a bond?

A Current Yield considers the time value of money, while YTM does not.

B YTM accounts for the reinvestment of coupon payments and capital gains/losses, whereas Current Yield only considers annual coupon income relative to the market price.

C Current Yield is a statutory measure mandated by SEBI, while YTM is an optional market measure.

D YTM is only used for Zero-Coupon Bonds, while Current Yield is used for all debt instruments.

E Current Yield is always higher than YTM for bonds trading at a discount.

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