Debt Yields and Pricing: Rapid Fire
Chapters in this video
- 0:00 Nominal yield is fixed: the rates-up trap
- 1:18 Current yield, YTM, and YTC: the four yields introduced
- 2:14 Discount versus premium yield ordering
- 3:25 Yield to worst and callable bond quoting logic
- 4:14 Pull to par: the $1,000 gravitational black hole
- 4:39 Most volatile bond: longest maturity, lowest coupon
- 5:10 Investment grade versus junk: the BBB- to BB+ cliff
- 5:51 Day-count math: corporate/municipal 30/360, government actual/actual
- 6:59 Trading flat: three exceptions with no accrued interest
- 7:27 Government bond quoting in 32nds and tax treatment of OID
- 8:42 Rapid-fire exam recap
What this video covers
- Why nominal yield (coupon) never changes when market rates move, and why test writers love to trap you on this
- How current yield (CY), yield to maturity (YTM), and yield to call (YTC) rank on discount bonds versus premium bonds
- Why a callable premium bond is quoted on a yield to call basis and a callable discount bond on a yield to maturity basis
- The pull-to-par concept and why every bond converges to $1,000 at maturity regardless of purchase price
- Which bond is the most volatile (longest maturity plus lowest coupon), and why a 30-year zero-coupon bond swings hardest
- The day-count memory aid: corporate and municipal use 30/360, government uses actual/actual, and why mixing them up kills your accrued-interest answer
- The three flat-trading exceptions (default, income/adjustment bonds, zero-coupon) and why market discount at maturity is ordinary income, not capital gain
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