Traditional yield measures, Financial Management

Assignment Help:

Current Yield

Current yield is defined as the annual coupon interest received on the market price.

         Current Yield =  1237_current yield.png                

For example, the current market price of a bond is Rs.843 and the coupon interest payment received on it is Rs.70. The Current yield of the bond is:

         Current Yield = 70/ 843 = 0.83, which can also be expressed as 8.3%.

Current yield for a bond selling at par would be equal to the coupon interest rate. Current yield of a bond selling at a premium (discount) would be less (greater) than the coupon interest rate.

An important drawback of current yield is that it considers only coupon income as a source of return to the investor, ignoring interest and capital gains (loss) that would also accrue.

 Yield to Maturity (YTM)

It is the rate of return earned by an investor who purchases a bond and holds it till maturity. YTM is the discount rate which equals the present value of promised cash flows to the current market price/purchase price.


Related Discussions:- Traditional yield measures

Budget classification on the basis of functions, ON THE BASIS OF FUNCTIONS ...

ON THE BASIS OF FUNCTIONS •Functional / Subsidiary budgets: A subsidiary budget is a budget of income or expenditure appropriate to or the responsibility of functions, like

Statement showing working capital requirement, Current Assets:- Stoc...

Current Assets:- Stock of Raw-Materials :- [(Cost of yearly consumption Of raw material)*{ (Average Inventory holding period (weeks/months))}/(52 weeks / 12 months)]=

How compound values can be calculated on anannual basis, How Compound value...

How Compound values can be calculated on anannual basis Compound values can be calculated on anannual basis, or on a half-yearly basis or on a monthly basis or on continuous ba

Brief introduction of asset backed security, An asset-backed security is a ...

An asset-backed security is a type of bond or note that is based on a pool of assets, or collateralized by the cash flows from a specified pool of underlying assets. As

Increase total revenue, The Australian skiing industry operates out of a ve...

The Australian skiing industry operates out of a very narrow seasonal base-approximately three months in a good season. In a good year, providers of accommodation, ski hire and tow

Write a market outlook for bond markets, The requirement of this assignment...

The requirement of this assignment that you write a Market Outlook for Bond Markets in a report form, in which you present your assessment of  the investment potential of global so

Portfolio management, Portfolio Management: Project Portfolio Manageme...

Portfolio Management: Project Portfolio Management (PPM) is the centralized management of processes, technologies and methods used by project management offices (PMOs) and pro

Describes net operating income approach to capital structure, Q. Describes ...

Q. Describes Net Operating Income Approach to Capital Structure? NOI (Net Operating Income Approach):- This is another speculation of capital structure which is propounded by '

Cash discount, I am trying to solve this formula: 2/10, net 30. In the bo...

I am trying to solve this formula: 2/10, net 30. In the book I am reading they have 2% x 360 ------- ------ = 2.04% x 18=36.72% 100-2% (30-10) I want to know how the

Financial management and production department, The production department i...

The production department in any firm is concerned with provision of production facilities, production cycle, skilled and unskilled labor, storage of finished goods, capacity utili

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd