For a bond issued at a discount, the order of yields from highest to lowest is:

• A. YTC > YTM > Current Yield > Coupon
• B. YTM > YTC > Current Yield > Coupon
• C. Current Yield > YTM > YTC > Coupon
• D. Coupon > Current Yield > YTM > YTC

Answer: (A)

When a bond is issued at a discount, the price you pay is below par, so your total return reflects both the coupon income and the fact that you’ll be repaid at par at maturity. The yield to call tends to be the highest because if the issuer calls the bond at the call price, you could realize a relatively large return over a shorter period, and when that shorter-term return is annualized it often exceeds the yield to maturity. The yield to maturity comes next, representing the total return if you hold the bond to its longer maturity, including the capital gain from buying at a discount and being redeemed at par. The current yield sits below the YTM because it only considers the annual coupon relative to the purchase price and ignores the gain at redemption. The coupon is the lowest because it’s fixed on par and doesn’t account for the purchase price or the time value of the redemption.