Par rate vs yield to maturity
What is the difference between these two and how are they linked together?
The par rate is the rate that you would use to discount all the cash flows so that the price of the bond is 100 (par).
The YTM is the rate that you would use to discount all the cash flows so that the price of the bond is at discount, at par or at premium.
So the par rate can be YTM but the YTM isn’t necessarily always the par rate. Is this right?
So when you use the bootstrapping technique to calculate the spot rates, can you use YTM or do you HAVE to use the par rate?
EDIT: I’ve read this article http://financialexamhelp123.com/par-curve-spot-curve-and-forward-curve/ but I was stil confused because reading 43 EoC 1-6 gives “yield to maturity par rates” so does it mean that this is the same as “par rate”?
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