When the bond value differs from par, the yield to maturity will differ from the coupon interest rate.

Question

Quizplus · Accepted Answer

This is because the yield to maturity takes into account the current price of the bond and the future cash flows, whereas the coupon interest rate remains fixed. If the bond is trading at a premium (above par value), the yield to maturity will be lower than the coupon interest rate, and if the bond is trading at a discount (below par value), the yield to maturity will be higher than the coupon interest rate.

When the Bond Value Differs from Par, the Yield to Maturity