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Abstract
Current yield is a common approximation for abond’s yield to maturity. The approximation becomes less accurate as the bond price moves away from par value. By performing a relatively easy calculation that incorporates an annuity calculation with the coupon rate, an adjustment to current yield can be generated that is a much better approximation of the actual yield to maturity.
TOPICS: Fixed income and structured finance, performance measurement
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Approximation of Yield to Maturity
