Breakdown
How it works
YTM is the discount rate that equates the present value of coupons and principal to the price. Current yield ignores capital gain or loss. Duration measures interest-rate sensitivity: modified duration × yield change ≈ percentage price change.
Formula
Worked example
1,000 face at 950, 4% semi-annual, 7 years: YTM 4.86%, current yield 4.21%, modified duration 6.0 — a 1% yield rise cuts the price about 6%.
Frequently asked questions
Why is price below par?
Market yields have risen above the coupon since issue. The bond still repays 1,000 at maturity, so the buyer earns the 50 discount plus coupons.
What is the difference between yield and coupon?
Coupon is the fixed cash paid on face value; yield is the return on what you actually paid, including the pull to par.
How do GCC bonds and sukuk compare?
Saudi, UAE and Qatar sovereigns yield roughly 0.6–1.2% over US Treasuries; sukuk and conventional bonds of the same issuer trade at near-identical yields.