Current Yield and How it is Related to Yield to Maturity

In this video, I explain what is meant by a bond's current yield and how it is related to its yield to maturity (YTM). In the process I also explain why, as long a bond's YTM remains constant, the price of a premium bond will consistently fall and why the price of a discount bond will consistently rise as they both approach maturity.

Students will particularly find this video useful in understanding parts of Chapter 8 (Interest Rates and Bond Valuation) of Corporate Finance (13th Edition) by Ross, Westerfield, Jaffe and Jordan.

[yashikaa]

Thank you for your effort, my concept has become more clear after this video

[nathanmogollan]

how can I make that excel chart of YTM with changing bond prices?

[zan]

So basically current yield is the return that the investment actually makes in a year. And yield to maturity is the investor's required rate of return. And current yield will keep reducing to ultimately match yield to maturity because an above-par bond price will move downwards towards par thanks to market correction. Alright, let's see if I can understand reinvestment risk now.

[jonathanisraelson]

he didint say that the face value was 1000 dollars and without that he cant calculate nothing

[luisshats]

Why do you assume that YTM does not change after one year?