Question
What is YTM in bond valuation terms?
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Answer
The single discount rate that equates price with cash flow present value.
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Question
Why is YTM also called a bond's internal rate of return?
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Answer
It is the discount rate that makes present value equal current price.
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Question
When does a bond trade at a premium to par?
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Answer
When its coupon rate is greater than its YTM.
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Question
When does a bond trade at a discount to par?
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Answer
When its coupon rate is less than its YTM.
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