Question

1. WeWork’s 7.875% unsecured bond’s price declined from 87.5 to 61.3. Did the market yield on WeWork’s bond go up or down?

Answer 1

Since WeWork's unsecured bond price declined to 61.3, the market yield had gone up. The reason is that the yield on a bond is a function of two factors

1. The price of the bond

2. Its interest or coupon rate

Normally, coupon rate is calculated on the face value of the bond and stays fixed over the life of the bond, but the yield responds to changes in the market price of the bond.

An increase in the market price reduces the yield whereas a decrease results in an increase in the yield as relative to the price the bond is acquired for the return is higher.