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CSI IFC Exam - Topic 3 Question 13 Discussion

When comparing the current yield and yield-to-maturity of a bond, which statement applies?
A) Yield-to-maturity accounts for the reinvestment of coupon payments.
B) Yield-to-maturity is based on the current market value of the bond, not the price paid.
C) Capital gains or capital losses are reflected in the current yield calculation.
D) Current yield includes in the calculation the time to maturity.

CSI IFC Exam - Topic 3 Question 13 Discussion

Actual exam question for CSI's IFC exam
Question #: 13
Topic #: 3
[All IFC Questions]

When comparing the current yield and yield-to-maturity of a bond, which statement applies?

Show Suggested Answer Hide Answer
Suggested Answer: A

This statement is correct because yield-to-maturity (YTM) is the annualized rate of return of a bond that assumes that all coupon payments are reinvested at the same rate until the bond matures. YTM takes into account the bond's current market price, par value, coupon rate, and time to maturity, and it calculates the compound interest earned on the reinvested coupons. Therefore, YTM reflects the total return of the bond, including both the interest income and the capital gain or loss.

Reference = Current Yield vs. Yield to Maturity - Investopedia, Yield to Maturity (YTM) - Investopedia, Bond Current Yield Calculator


by Deeanna at Jun 30, 2026, 05:51 PM

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Jenise
3 days ago
I’m leaning towards B. Market value is key for YTM.
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Carylon
8 days ago
Agreed, A makes sense. It’s crucial for total return.
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Stevie
14 days ago
I think A is correct. YTM considers reinvestment.
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Lorenza
19 days ago
D) sounds off, current yield doesn't include time to maturity, right?
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Reuben
24 days ago
Wait, C) is wrong, current yield doesn't factor in capital gains.
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Lindsey
29 days ago
B) is misleading, it should consider the price paid too.
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Rodolfo
1 month ago
Totally agree with A! It's a key factor.
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Verdell
1 month ago
A) is correct, YTM does consider reinvestment.
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Benedict
1 month ago
I vaguely recall that current yield only looks at the coupon payments relative to the price, so C might not be right either.
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Edison
2 months ago
I practiced a similar question, and I’m pretty sure current yield doesn’t factor in time to maturity, so D seems wrong to me.
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Lorrine
2 months ago
I’m not entirely sure, but I think yield-to-maturity is related to the bond's current market value, which makes me lean towards B.
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Tanesha
2 months ago
I remember that yield-to-maturity does consider reinvestment of coupon payments, so I think A might be correct.
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