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.
yield is the return on investment, for example dividend paid.
coupon is the rate of interest related to bonds or debentures.
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return?
Coupon rate
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.
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
Coupon rate is something that is paid semiannually. The interest rate is something that starts as soon as a bond is issued.
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
No......The price of the bonds will be less than par or 1,000.....
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?
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.
Yield to maturity means the interest rate for which the present value of the bond's payments equals the price. It's considered as the bond's internal rate of return. Yield to. call is a measure of the yield of a bond, to be held until its call date.