If a bond offers a current yield of 5% and a yield to maturity of 5.45%,then the:
A) bond is selling at a discount.
B) bond has a high default premium.
C) promised yield is not likely to materialize.
D) bond must be a Treasury Inflation-Protected Security.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is higher than the current yield, which means the bond is selling at a discount. This is because the YTM reflects the total return an investor can expect to receive if they hold the bond until maturity, taking into account the discount or premium at which the bond is currently priced. A YTM higher than the current yield indicates that the bond's price is expected to increase over time, narrowing the gap between the purchase price and the face value at maturity.

If a Bond Offers a Current Yield of 5% and a Yield