Great question! Basically, In order to drive home the point that the total return (YTM) on the bond is comprised of current yield and capital gains (just like a stocks total return is comprised of dividend yield and capital gains). I don’t HAVE to make this assumption - we can still do current yield and capital gains calculation. But if the YTM changes in one year, then the price at the end of one year will adjust accordingly, and the sum of current yield and capital gains will no longer add up to the initial YTM at which the investor bought the bond. Does that help?
great stuff
Best explanation I've seen
Thank you for your effort, my concept has become more clear after this video
Wow! Fascinating!
Great video, perfectly explained!
Lovely explanation.
he didint say that the face value was 1000 dollars and without that he cant calculate nothing
That’s true. The $1,000 Face Value is assumed, as that is the most common denomination of Treasuries.
Why do you assume that YTM does not change after one year?
Great question! Basically, In order to drive home the point that the total return (YTM) on the bond is comprised of current yield and capital gains (just like a stocks total return is comprised of dividend yield and capital gains). I don’t HAVE to make this assumption - we can still do current yield and capital gains calculation. But if the YTM changes in one year, then the price at the end of one year will adjust accordingly, and the sum of current yield and capital gains will no longer add up to the initial YTM at which the investor bought the bond.
Does that help?