Smart Bond Investing—Yield and Return
Yield is a general term that relates to the return on the capital you invest in the bond.
Smart Move When someone tells you a bond's yield is 7 percent, ask: "What definition of yield are you using?"
There are several definitions that are important to understand: coupon yield, current yield, yield-to-maturity, yield-to-call and yield-to-worst.
Let's start with the basic yield concepts.
Say you check the bond's price later, and it's trading at 101 ($1,010). The current yield has changed:
If you buy a new bond at par and hold it to maturity, your current yield when the bond matures will be the same as the coupon yield.
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