Bond Price vs Yield Explained | Simple CFA Rule

AnalystPrep · Beginner ·💰 FinTech & AI for Finance Professionals ·1mo ago

About this lesson

Many CFA candidates spend too much time calculating and miss the simple idea behind the question. If a bond is trading below its face value, it is selling at a discount. This means the yield must be higher than the coupon rate. In this video, we walk through an example where the bond is priced at 94 and show why the yield comes out higher than the coupon. We also explain a key calculator tip: always enter present value as a negative number when solving for interest rates. This helps you avoid common exam mistakes. If you are preparing for the August 2026 CFA exam, our Live Online Classes are designed to make concepts like this clear and easy to apply. Get started here: https://analystprep.com/cfa-level-1-live-online/ Save 30% this June using code AP30. #CFA #CFALevel1 #CFAPrep #FixedIncome #BondPricing #FinanceEducation #August2026CFA #AnalysPrep

Full Transcript

And this is the key. When solving for any interest rate, make sure that you make present value negative. And then solve for I, you get 3.88. Multiply that by two, you get 7.76. We're not surprised. The price was 94. The price is selling at a discount, so the yield had to be greater than the coupon rate of 7%.

Original Description

Many CFA candidates spend too much time calculating and miss the simple idea behind the question. If a bond is trading below its face value, it is selling at a discount. This means the yield must be higher than the coupon rate. In this video, we walk through an example where the bond is priced at 94 and show why the yield comes out higher than the coupon. We also explain a key calculator tip: always enter present value as a negative number when solving for interest rates. This helps you avoid common exam mistakes. If you are preparing for the August 2026 CFA exam, our Live Online Classes are designed to make concepts like this clear and easy to apply. Get started here: https://analystprep.com/cfa-level-1-live-online/ Save 30% this June using code AP30. #CFA #CFALevel1 #CFAPrep #FixedIncome #BondPricing #FinanceEducation #August2026CFA #AnalysPrep

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