How can yield to maturity change? For example, if i buy a bond at par value of 100, for a coupon rate of 10% and i hold the bond till maturity. will the yield to maturity remain at 10%? how does YTM change?
2 Answers
If the price increases to $110, the yield for a potential buyer of your bond would be lower than if they could buy it for $100. The yield to maturity reflects the relationship between the current price and future cash flows, not your cost and future cash flows.
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so ytm and coupon rate are the same in case if i buy a bond and hold till maturity ? Oct 7, 2019 at 18:58
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If you buy it at par, the bond is not callable, and hold it to maturity, then yes. Oct 7, 2019 at 19:09
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The price of a bond fluctuates on the open market. Quoted yield may be different than face value, or the YTM at your purchase time, based on the price at which the bond can transact today.
