Observed yield curve and coupon bond yield curve

CFA Level I Fixed Income
#1

Can someone please explain what it means by “observed yields” in the market and “coupon bond yield” curve ?

Q- Which of the following yield curves is least likely to consist of observed yields in the market?

A) Forward yield curve

B) Par bond yield curve

C) Coupon bond yield curve

OA : B

#2

There is no such thing as a “coupon bond yield curve”. I suspect that this is an expression the author of the question dreamed up to mean the yields on (actual, in-the-market) coupon-paying bonds.

“Observed yields” are yields on actual, in-the-market, coupon-paying bonds: you look up the CUSIP on some bond, check its market price, and compute its YTM.

Because very few (i.e., essentially zero) bonds trade exactly at par, you won’t observe a bond trading at par.

It’s a poor question.

#3

Thanks S2000magician. This really helps. The source of this question is Schweser’s Study Package.

#4

You’re welcome.