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Exam CIFC Topic 1 Question 193 Discussion

Actual exam question for IFSE Institute's CIFC exam
Question #: 193
Topic #: 1
When comparing the current yield and yield-to-maturity of a bond, which statement applies?

Suggested Answer: A Vote an answer

Explanation
This statement is correct because yield-to-maturity (YTM) is the annualized rate of return of a bond that assumes that all coupon payments are reinvested at the same rate until the bond matures. YTM takes into account the bond's current market price, par value, coupon rate, and time to maturity, and it calculates the compound interest earned on the reinvested coupons. Therefore, YTM reflects the total return of the bond, including both the interest income and the capital gain or loss.
References = Current Yield vs. Yield to Maturity - Investopedia, Yield to Maturity (YTM) - Investopedia, Bond Current Yield Calculator

by Ansel at Mar 10, 2024, 11:05 AM

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