A change in the current yield ________ signals a change in the same direction of the yield to maturity.

Question

Quizplus · Accepted Answer

The current yield is the annual interest payment divided by the current market price, while the yield to maturity is the total return anticipated if the bond is held until it matures. Since the current yield is based solely on the current market price and not on the bond's face value or the time remaining until maturity, a change in the current yield will always signal a change in the same direction of the yield to maturity.

A Change in the Current Yield ________ Signals a Change