|
|
|
| If a
bond is selling at par, yield = coupon rate. |
||
| If
the bond sells at a discount, yield > coupon |
||
| rate. Hence the following approximation: |
||
|
|
|
|
| If
the bond sells at par, the approximation is |
|||
| exact.
If it sells at a discount, the second term in |
|||
| the
numerator is positive, and the approximation |
|||
| is greater than
the coupon rate as desired. |
|||