Question

Is it better for bondholders when the yield to maturity increases or​ decreases? Bondholders are better off when the yield to​ maturity:

Answer 1

Answer:

decreases

Explanation:

The yield to maturity is not the same as a bond's current yield. The yield to maturity is the expected return for a bond if the investor decides to hold the bond until it matures. When the bond's price decreases, the yield to maturity increases, and vice-versa. A decrease in the yield to maturity not only implies a higher bond price but it also represents a decrease in potential capital losses.