notes/10 - Projects/CSC/Chapter 7/YTM.md

YTM is the most comprehensive yield measure because it accounts for three things:

• Coupon income
• Capital gain or loss (if bought below or above par)
• Reinvestment of coupons at the same rate

That last assumption — reinvesting coupons at the same YTM — is also its main weakness, because interest rates change over time. That's called reinvestment risk.

One key fact worth memorizing: when a bond trades at par, current yield = approximate YTM = YTM. They're only equal at par.