If interest rates rise after a bond is issued, the yield to maturity will exceed the current yield.

Name: If interest rates rise after a bond is issued, the yield to maturity will exceed the current yield.
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Question

If interest rates rise after a bond is issued, the yield to maturity will exceed the current yield.​

Quizplus · Accepted Answer

When interest rates rise, new bond issuances will have higher coupon rates to remain competitive with the market. As a result, previously issued bonds with lower coupon rates will have a lower value in the market, resulting in a higher yield to maturity than the current yield.

If Interest Rates Rise After a Bond Is Issued, the Yield