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When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return?
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.
When the coupon rate (the contractual periodical "interest" payments) are lower than the yield (the market required return) the bond will be in discount. This discount makes up for the low value of the coupons.
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.
No......The price of the bonds will be less than par or 1,000.....
Coupon rate
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
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.
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
This can't be answered without more information (ie coupon and term/maturity). However, the yield will exceed the coupon rate as the price is less than 100
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.
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return?
yes
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.
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 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.