Financial Risk Manager (FRM, Topic 4: Valuation and Risk Models, Fixed Income, Bruce Tuckman Chapter 3, Returns, Spreads and Yields). Yield to maturity (aka, yield) is the single rate that discounts a bond's cash flows to a present value that matches the bond's traded (observed) price.
In case this is more helpful, I recorded a SHORTER version (trying to cut to the chase) of my previous video's explanation of bond yield (aka, yield to maturity). I make the same four (4) points about how to interpret that yield.
Superficially, the yield to maturity (YTM, aka yield) simply inverts the usual time value of money (TVM) inputs by solving for the yield as a function of four inputs: face (future) value, coupon (payment), maturity (time), and current price (present value). But in terms of interpretation, I...
Learning objectives: Define the coupon effect and explain the relationship between coupon rate, YTM, and bond prices. Explain the decomposition of P&L for a bond into separate factors including carry roll-down, rate change, and spread change effects. Identify the most common assumptions in carry...
Learning objectives: Compute a bond’s YTM given a bond structure and price. Calculate the price of an annuity and a perpetuity. Explain the relationship between spot rates and YTM.
Questions:
906.1. Exactly one year ago, Sally purchased a $100.00 face value bond that pays a semi-annual coupon...
Learning objectives: Distinguish between gross and net realized returns, and calculate the realized return for a bond over a holding period including reinvestments. Define and interpret the spread of a bond, and explain how a spread is derived from a bond price and a term structure of rates...
Hi,
I have a question on the assumptions behind Yield-To-Maturity.
I have read the Yield-To-Maturity (YTM) chapter on the Tuckman (chapter 3 on my edition) that explains why YTM is a measure of the realized return to maturity of a bond. My understanding of the explanation is as follow:
If...
AIMs: Define, interpret, and apply a bond’s yield-to-maturity (YTM) to bond pricing. Compute a bond's YTM given a bond structure and price. Explain the relationship between spot rates and YTM. Calculate the price of an annuity and a perpetuity.
Questions:
316.1. Assume the following 2-year...
This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
By continuing to use this site, you are consenting to our use of cookies.