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CFA Level 1
Fixed Income

Comparative Yield to Maturity Analysis of Two Bonds

Very Hard Fixed Income Valuation Yield Measures

A fixed income analyst is evaluating two bonds, Bond X and Bond Y, with similar credit ratings and maturities. Bond X has a coupon rate of 5% and is priced at $1,100, while Bond Y has a coupon rate of 7% and is priced at $1,300. Both bonds pay interest annually and have a face value of $1,000. The analyst is particularly interested in understanding how the yield to maturity (YTM) of these bonds compares, given their differing prices and coupon rates. Which of the following statements about the relationship between the yield measures of Bond X and Bond Y holds true?

Hint

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