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Homework answers / question archive / The yield-to-maturity (yield) of a bond is its return if you purchase it in the secondary market and hold it until it matures
The yield-to-maturity (yield) of a bond is its return if you purchase it in the secondary market and hold it until it matures. So for example, if you bought a bond for $100 and its yield to maturity is 5%, then when the bond matures you get $105 back. Let’s pretend we have two bonds. Bond A has a yield-to-maturity of 9% while Bond B has a yield-to-maturity of 2%. What are some reasons why Bond B’s yield is lower than Bond A? Hint: it has to do with types of risk.
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