Products & Their RisksQuestion 42 of 398
Nominal yield on a bond refers to:
a.The annual coupon divided by the current market price
b.The stated coupon rate as a percentage of par value
c.The total return if held to maturity
d.The yield if the bond is called early
Explanation
Nominal yield is simply the bond's stated coupon rate expressed as a percentage of par value, and it does not change with market price. Coupon over market price is current yield, held-to-maturity return is YTM, and early-call return is yield to call.
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