pearlmike28 pearlmike28
  • 14-07-2022
  • Mathematics
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If a bond is trading at a premium, what is the relationship between the bond's coupon rate, current yield and yield to maturity?

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adefioyelaoye
adefioyelaoye adefioyelaoye
  • 15-07-2022

A bond purchased at a premium, it will have a yield to maturity and current yield that is lower than its coupon rate.

What is a Premium bond?

This is usually above its face value which may be as a result of the interest rate being higher than the current market interest rates.

When a bond is traded at a premium, the yield to maturity and current yield will be lower than its coupon rate.

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