Clarifying the following statement

CFA Level I Fixed Income
#1

Dear all,

I am reading AR #54- Introduction to Fixed-Income Valuation and have some difficulties understanding. Let’s consider a hypothetical example of the following:

  • A YTM of 5%, semiannual bond basis

_ Question: I think I read from somewhere that coupon rate/YTM are typically quoted as a per annum basis; so can I say that the term ‘semiannual bond basis’ just merely tell us that the bond pay coupons every 6 months and the rate we see is always based on per annum basis __ ? _

Thank You.

Cheers,

Ernest

#2

I’m not really sure what you’re asking, but know that yield to maturity is not the same as the coupon rate. These are vastly different creatures.

#3

Thanks Greenman72.

I’m not sure what the phrase - _ YTM 5% bond on a semi-annum basis _ - means?

Does it mean (on a p.a. basis):

  1. 5% OR
  2. 10%
#4

When they say that the YTM is 5%, that’s 5% _ per year _ (BEY).

Interest rates are always quoted as annual rates _ unless they specifically say otherwise _.