Discount, Par & Premium Yield Order

🔑 Master ordering table (the core tested content)

Ranking of the four yields for the same bond depending on where it trades relative to par:

Same relationship stated per-yield versus the coupon:

Discount bond yield relationships

Here’s a summary of the discount bond example from the previous sections.

A 10 year, $1,000 par, 4% bond is trading at $800. The bond is callable at par after 5 years.

Coupon = 4% Current yield = 5% YTM = 6.7% YTC = 8.9%

⚠️ This order isn’t random. Every discount bond shows the same general relationship among these yields:

• The bond see-saw helps you quickly connect a bond’s price (discount vs. premium) to the relative level of its yields.
• Many test-takers memorize the see-saw and rewrite it on scratch paper at the start of the exam to avoid doing unnecessary calculations.

Premium bond yield relationships

Now let’s use the premium bond example from the previous sections.

A 10 year, $1,000 par, 4% bond is trading at $1,100. The bond is callable at par after 5 years.

Coupon = 4% Current yield = 3.6% YTM = 2.9% YTC = 1.9%

Again, this ordering follows a consistent pattern. Every premium bond shows the same general relationship among these yields:

• You can use the bond see-saw here as well.
• Just like with discount bonds, the see-saw gives you a quick visual. For a premium bond, the price side points upward because the bond is trading above par.
• If you remember the yield order shown on the see-saw, yield-based questions become much more straightforward.

Yield for par bonds

We’ve seen how price affects yields for bonds purchased at a discount and at a premium. What happens if a bond is purchased at par ($1,000)?

There’s no gain or loss from the purchase price:

• So the investor’s return comes only from the coupon payments.
• For a bond purchased at par, the see-saw shows the coupon lining up with current yield, YTM, and YTC.
• ⚠️ If you see a question about par bond yields, keep it simple: they’re all the same.

The bond see-saw

📌 Yield is a major topic on this material, and the bond see-saw is a useful way to visualize the relationship between:

We’ve looked at the see-saw for discount, premium, and par bonds.

• 📌 If you plan to use a “dump sheet,” this is a common item to include. A dump sheet is a set of key visuals or reminders you write on scratch paper after the exam begins.
• Many test-takers memorize the bond see-saw so they can recreate it quickly and use it to answer yield questions.

🔑 Memory acronym

Some test-takers also use acronyms, like this:

CYM Call

CY = Current Yield M = yield to Maturity Call = yield to Call

Use whatever memory tool helps you recall these terms and their order.

Key points

Discount bond yield relationships

• Current yield, YTM, and YTC are higher than the coupon
• Order of all yields (lowest to highest):
  1. Nominal yield (coupon)
  2. Current yield
  3. Yield to maturity (YTM)
  4. Yield to call (YTC)

Premium bond yield relationships

• Current yield, YTM, and YTC are lower than the coupon
• Order of all yields (lowest to highest):
  1. Yield to call (YTC)
  2. Yield to maturity (YTM)
  3. Current yield
  4. Nominal yield (coupon)

Par bond yield relationships

• All yields are the same

Sources

Primary/official references for the material in this chapter. Every link was fetched and returned HTTP 200 on 2026-08-15.