Relationship Between Yield To Maturity and Coupon Rate
The concept of current yield is closely related to other bond concepts, including yield to maturity, and coupon yield. When a bond sells at;
- a discount: YTM > current yield > coupon yield
- a premium: coupon yield > current yield > YTM
- par: YTM = current yield = coupon yield.
Current Yield = Total Yield - Capital Gains Yield
The current yield is the annual payment divided by the price. Algebraically expressed as Y = R/P, where Y is yield, R is the annual payment, and P represents price. This creation shows the fine line between high and low returns over more than one period. A high yield will produce a relative payment and a low yield will do the same. When the yields of several periods are compared a higher yield will show a higher payment with less risk associated. This equates to investors expecting a higher yield over a length of investing. The possibility of market risks are ignored.
Read more about this topic: Current Yield
Famous quotes containing the words relationship between, relationship, yield, maturity and/or rate:
“The relationship between mother and professional has not been a partnership in which both work together on behalf of the child, in which the expert helps the mother achieve her own goals for her child. Instead, professionals often behave as if they alone are advocates for the child; as if they are the guardians of the child’s needs; as if the mother left to her own devices will surely damage the child and only the professional can rescue him.”
—Elaine Heffner (20th century)
“Sometimes in our relationship to another human being the proper balance of friendship is restored when we put a few grains of impropriety onto our own side of the scale.”
—Friedrich Nietzsche (1844–1900)
“Truth, Sir, is a cow which will yield such people no more milk, and so they are gone to milk the bull.”
—Samuel Johnson (1709–1784)
“To see self-sufficiency as the hallmark of maturity conveys a view of adult life that is at odds with the human condition, a view that cannot sustain the kinds of long-term commitments and involvements with other people that are necessary for raising and educating a child or for citizenship in a democratic society.”
—Carol Gilligan (20th century)
“If you could choose your parents,... we would rather have a mother who felt a sense of guilt—at any rate who felt responsible, and felt that if things went wrong it was probably her fault—we’d rather have that than a mother who immediately turned to an outside thing to explain everything, and said it was due to the thunderstorm last night or some quite outside phenomenon and didn’t take responsibility for anything.”
—D.W. Winnicott (20th century)