How Does Investopedia Video: Bond Yields - Current Yield and YTM Work?

Imagine you're sharing a big bag of candy with your friends, that’s how bond yields work!

A bond is like a promise from someone (like a company or government) to give you money back in the future. You lend them some cash now, and they pay you more later, kind of like borrowing a toy from your friend with a promise to return it next week.

• Current yield is like counting how many candies you get right now for each candy you gave away.
• Yield to Maturity (YTM) is like thinking ahead: if you keep the toy until next year, how many extra candies will you have in total?

So, current yield is what you're getting now, while YTM shows what you'll get in the long run, like planning for a bigger candy stash later.

It's like trading toys with your friends, sometimes you want to know how many candies you’ll get right away; other times, you’re excited about all the candy you’ll have if you wait! Imagine you're sharing a big bag of candy with your friends, that’s how bond yields work!

A bond is like a promise from someone (like a company or government) to give you money back in the future. You lend them some cash now, and they pay you more later, kind of like borrowing a toy from your friend with a promise to return it next week.