Coupon Rate Current Yield Yield-to-Maturity (YTM)

Coupon Rate (Nominal Yield): Sum of coupons paid in a year in percent of par (face) value.

Current Yield: Sum of coupons paid in a year in percent of bond (market) price.

Yield-to-Maturity (YTM): Internal rate of return of investing in the bond

Compare the coupon rate, the current yield and the yield to maturity of a ten-year $1000 security that pays 9% annually coupons and was purchased for $950 on the issue date.

Coupon Rate:  90$ / 1000$ = %9


Current Yield: 90$ / 950$ = %9.5

Yield-to-Maturity (YTM):  90 / (1+x) + 90/ (1+x)^2.....+ 1090/ (1+x)^10=950                          
 x= %9.8

Discount Situation: TYM >  CY > NY



If was purchased for $1050 on the issue date.

Coupon Rate:  90$ / 1000$ = %9


Current Yield: 90$ / 1050$ = %8.6

Yield-to-Maturity (YTM):  90 / (1+x) + 90/ (1+x)^2.....+ 1090/ (1+x)^10=1050 
  x= %8.3

Discount Situation: NY > CY  > TYM