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Bond yields can be a sticking point for many SIE candidates. Understanding the inverse relationship between price and yield is only the first step to mastering this content. Knowing how the nominal yield, current yield, yield to maturity and in some cases how yield to call relate to one another are essential. The bond see saw is a time tested way to ensure you can handle these questions on your SIE Exam. Practice drawing it out for each possible scenario. This will make these questions visual and in most cases simple. All you have to do is look at the drawing and you will be able to quickly answer the questions on your actual SIE exam. Create the seesaw with bonds at a discount, when purchasing bonds at par and when bonds are purchased at a premium and you will be in good shape. It is important to note that the nominal yield never changes. It is printed in ink on the bond certificate . Your current yield is a relationship between the annual interest payments and the price the investor pays for the bond. Once the investor purchases the bond he /she has locked in their current yield The formula is always Annual Income / Current Market Price. An investor’s yield to maturity is the overall return for purchasing the bond; it takes into account the Annual interest payments with the assumption that they are reinvested at the same rate ( not spent by the owner of the bond) and any gain or loss at maturity. For bonds purchased at a discount the investor will have a gain. For a bond purchased at a premium the investor will have a loss. Don’t worry you will not have to calculate the yield to maturity. If a bond is callable the yield to call will be the highest yield for a bond purchased at a discount and the lowest for a bond purchased at a premium.