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Why do Bonds Have Different Yields?

 

  • Default risk –  The higher the default risk, the higher the required YTM
  • Liquidity – The less liquid the bond, the higher the required YTM
  • Call features – Increase required YTM
  • A bond that can be redeemed by the issuer prior to its maturity
  • Extendible feature – Reduce required YTM
  • An extendible bond gives its holder the right to "extend" its initial maturity at a specific date or dates
  • Retractable feature – Reduce required YTM
  • A bond that features an option for the holder to force the issuer to redeem the bond before maturity at par value





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