Bonds: general question

Can we have the following two bonds similar in most of the characteristics in the market at the same time? Bond 1: Coupon 8%, YTM 8%.

Bond 2: Coupon 9%, YTM 9% According to me, they can’t be present because market rates at a point in time are fixed. So, YTM has to be same on bonds with diffr coupon rates. (Assume suitable data wherever necessary)

Only if bond #2 is riskier in some respect.

(In practice questions for the CFA exams, this sort of thing shows up often. Not in the real world, however.)

Thank you.

I hope you had a good night’s sleep :smiley:

Agreed, this will be possible only if there is some kind of difference, especially risk

Yea, I do understand that there will be a difference in YTM if there is some kind of risk. I mean there has to be, but for instruments of same risk class, it shouldn’t have been the case and that occured to me while I was reading FI. I am taking so much if time doing this. Don’t know whether I’ll pass. I mean I have the whole of econ left and ethics is also there.

Anyway thanks :smiley:

Yes as per correctly explained by S2000 magician and exotichedge, YTM is IRR on the bonds it can differ if there is a kind of difference which effect the individual bond prices.