What are the differences between the bond's coupon rate, current yield, and yield to maturity?

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What are the differences between the bond's coupon rate, current yield, and yield to maturity?




Answer: A bond is a long-term debt of a government or corporation. When you own a bond, you receive a fixed interest payment each year until the bond matures. This payment is known as the coupon. The COUPON RATE is the annual coupon payment expressed as a fraction of the bond's FACE VALUE. At maturity the bond's face value is repaid. In Canada most bond's have a face value of $1,000. The CURRENT YIELD is the annual coupon payment expressed as a fraction of the current bond's price. The YIELD TO MATURITY measures the average rate of return to an investor who purchases the bond and holds it until maturity, accounting for coupon income as well as the difference between purchase price and face value. 

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