What is the relationship between yield and price of a bond?
If interest rates or market yields rise, the price of a bond falls. Conversely, if interest rates or market yields decline, the price of the bond rises. In other words, the yield of a bond is inversely related to its price. The relationship between yield to maturity and coupon rate of bond may be stated as follows: When the market price of the bond is less than the face value, i.e., the bond sells at a discount, YTM > current yield > coupon yield. When the market price of the bond is more than its face value, i.e., the bond sells at a premium, coupon yield > current yield > YTM. When the market price of the bond is equal to its face value, i.e., the bond sells at par, YTM = current yield = coupon yield.
