Yield and Yield Spread Measures for Fixed-Rate Bonds
2024 Curriculum
CFA Program Level I
Fixed Income
Refresher reading access
Overview
Earlier lessons demonstrated the relationship between bond prices and yields-to-maturity (YTMs), as well as other features, such as coupon rate and time-to-maturity. Two important considerations for interpreting and determining yields-to-maturity and other yield measures are the assumed frequency of compounding interest and the presence of embedded options that could affect cash flow amounts or timing. This module explores these considerations and extends the analysis of yields by introducing spread measures, which compare yields to benchmark rates to ascertain how much an investor would be compensated for taking certain risks.
1 PL Credit
If you are a CFA Institute member don’t forget to record Professional Learning (PL) credit from reading this article.