FRM Financial Risk Manager Practice Test

The yield to a bond depends on all of these factors: a bond’s term to maturity, the time between its issue date and its maturity date, uncertainty in price, inflation, and risk. Therefore, different bonds have different yields.

Key Takeaway: Depending on different values of different bonds, there are some variants of YTM:
- Yield to call: It is calculated similarly with YTM but when a bond is callable, the cash flow is shortened.
- Yield to put: It is the same as yield to call, but the bond holder has the option to sell the bond back to the issuer at a fixed price on a specified date.
- Yield to worst: It is the lowest yield of all kinds, when the bond is callable or exchangeable.