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Coupon rate
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∙ 16y ago
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Difference between coupon rate and yield to maturity?
The coupon rate is the actually stated interest rate. This is the rate earned on a NEW issue bond. The yield to maturity takes into consideration the purchase price of a bond bought in the secondary market. For example, if you buy a $1,000 bond for $1100 which matures in 10 years and has a coupon of 5%, your coupon is 5%, but your yield to maturity would be closer to 4% because you paid $1100, but will only get back $1,000 at maturity (losing $100). The "loss" reduces the return.
A 6-year Circular File bond pays interest of 80 annually and sells for 950 What are its coupon rate current yield and yield to maturity?
Bond Pricing. A 6 year circular file bond pays interest of $80 annually, and sells for $950. What are its coupon rate, Current yield, and yield maturity?
The interest rate on a bond is called?
The interest payment is called the "coupon" and it is usually a fixed amount per year, which is set when the bond is issued. But when you buy a bond on the market for a price that is different from the original face value, the effective interest rate is called the "yield". The reasons why the yield might be different from the coupon rate are described in the related link called Bond yields and coupon.
When the market rate of return for a particular bond is much less than its coupon rate the bond is selling at?
If the current interest rate is lower than the coupon rate, a bond will be priced at a premium. For example, a bond originally issued at par with a 5% coupon would initially yield 5% to an investor. If market rates subsequently dropped to 3%, the bond would be selling at a premium to reflect the lower interest rate. In this example, the original bond sold for $1,000 and had a coupon rate of 5% to yield $50 per year in interest. If interest rates dropped to 3%, the price of the bond would increase to approximately $1,667. A purchaser of the bond would still receive $50 per year in interest which would provide an annual yield of 3% ($50/$1,667 = 3.0%).
Bond face value-$100, time to maturity - 5 years, coupon rate 5% redeemed at face value, what will be the ytm?
The yield to maturity will be 5% since both Face Value and Redemption value are same. If you purchase the bond for 95 or 105 your yield to maturity will change than what the coupon rate is.
What is the interest rate the bond issuer pays to the bondholder called?
The interest rate paid on a bond is known as the coupon rate. A $1,000 fixed rate bond with a 5% coupon rate purchased at par would yield $50 annually in interest payments.
What is the difference between yield and coupon rate?
The difference between the coupon rate and the required return of a bond is dependent upon the type of bond. Junk bonds will have the biggest difference between its return and the coupon rate.
What happen when the yield to maturity on a bond is greater than the coupon rate?
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
When a bonds yield to maturity is greater than the bonds coupon rate the bond?
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
If a bond's yield to maturity exceeds its coupon rate does the bond's current yield must also exceed its coupon rate?
No......The price of the bonds will be less than par or 1,000.....
Difference enters bond's coupon interest rate the current yield y bond-holder's required rate of return?
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return?
Difference between coupon rate and yield to maturity?
The coupon rate is the actually stated interest rate. This is the rate earned on a NEW issue bond. The yield to maturity takes into consideration the purchase price of a bond bought in the secondary market. For example, if you buy a $1,000 bond for $1100 which matures in 10 years and has a coupon of 5%, your coupon is 5%, but your yield to maturity would be closer to 4% because you paid $1100, but will only get back $1,000 at maturity (losing $100). The "loss" reduces the return.
Is the current yield greater than the coupon rate for a discount bond?
yes
A 6-year Circular File bond pays interest of 80 annually and sells for 950 What are its coupon rate current yield and yield to maturity?
Bond Pricing. A 6 year circular file bond pays interest of $80 annually, and sells for $950. What are its coupon rate, Current yield, and yield maturity?
If a bond with face value of 1100 and a coupon rate of 8 is selling at a price of 970 is the bond's yield to maturity more or less than 8 and what is the current yield?
When a bond sells at a discount, the yield is higher than the coupon rate. Your income is 1,100 x 8% = 88. You invested 970. 88/970 = 9.07% yield.
The interest rate on a bond is called?
The interest payment is called the "coupon" and it is usually a fixed amount per year, which is set when the bond is issued. But when you buy a bond on the market for a price that is different from the original face value, the effective interest rate is called the "yield". The reasons why the yield might be different from the coupon rate are described in the related link called Bond yields and coupon.
How does the yield to maturity on a bond differ from the coupon yield or current yield?
The rate of return anticipated on a bond if held until the end of its lifetime. YTM is considered a long-term bond yield expressed as an annual rate. The YTM calculation takes into account the bond's current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupon payments are reinvested at the same rate as the bond's current yield. YTM is a complex but accurate calculation of a bond's return that helps investors compare bonds with different maturities and coupons.
