Final answer:
No, that statement is false. The yield to maturity (YTM) and current yield of a bond are two different concepts. The YTM represents the total return expected from a bond if held until maturity, while the current yield is calculated by dividing the annual interest payment by the current market price of the bond.
Step-by-step explanation:
No, that statement is false. The yield to maturity (YTM) and current yield of a bond are two different concepts. The YTM represents the total return expected from a bond if held until maturity, taking into account the bond's price, face value, coupon rate, and time remaining until maturity. On the other hand, the current yield is calculated by dividing the annual interest payment (coupon) by the current market price of the bond.
Let's consider an example to illustrate this. Suppose there are two bonds, Bond A and Bond B, both with a YTM of 6%. However, Bond A is currently priced at $900, while Bond B is priced at $1,100. Bond A has a coupon rate of 5%, while Bond B has a coupon rate of 8%. The current yield of Bond A would be calculated as (0.05 * $1,000) / $900 = 0.056 (or 5.6%), while the current yield of Bond B would be calculated as (0.08 * $1,000) / $1,100 = 0.0727 (or 7.27%). As you can see, even though the YTM is the same for both bonds, the current yield is different due to differences in their market prices.