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When a bonds yield to maturity is greater than the bonds coupon rate the bond?
Wiki User
∙ 13y ago
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
Demond Stroman
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If a coupon bond is selling at par does the current yield equal its yield to maturity?
Yield usually refers to yield to maturity. If a bond is trading at par it usually means the yield to maturity is equal to the coupon.
Why do bond prices and yields vary inversely?
Bonds are valued by discounting the coupon payments and the final repayment by the yield to maturity on comparable bonds. The bond payments discounted at the bond’s yield to maturity equal the bond price. You may also start with the bond price and ask what interest rate the bond offers. This interest rate that equates the present value of bond payments to the bond price is the yield to maturity. Because present values are lower when discount rates are higher, price and yield to maturity vary inversely.
Will a bond's yield to maturity increase or decrease if a bond 's price increases?
as yield to maturity increases the bonds price decreases, because a higher yield to maturity means its riskier to investors
If two bonds have the same maturity the same yield to maturity and the same level of risk the bonds should they sell for the same price regardless of the bond's coupon rate?
if two bonds offer the same duration and yield, then an investor should look at their levels of convexity. if one bond has greater convexity, it is less affected by interest rate changes. also, bonds with higher convexity will have higher price than bonds with lower convexity regardless whether interest rates rise or fall. Ergo, investors will have to pay more with greater convexity due to the bond's lesser sensitivity to interest rate changes.
What is likely to happen to yield to maturity on bonds in the marketplace if inflationary expectations increase?
The prices of bonds will fall and yields to maturity (or call date) will rise, since investors will require greater yields on their investments to offset the expected increase in inflation.
What are the different types of yields on bonds?
* yield to worst (to maturity or to call date) * current yield * coupon yield
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.
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.....
If a coupon bond is selling at par does the current yield equal its yield to maturity?
Yield usually refers to yield to maturity. If a bond is trading at par it usually means the yield to maturity is equal to the coupon.
What happens when a yield to maturity is less than the yield to call?
The issuer will call the bonds and issue new bonds to the maturity date.
Does the yield to maturity represent the promised or expected return on the bonds?
The yield to maturity represents the promised yield on a bond
How do you find bonds yield?
You don't find it, you calculate it based upon; 1) Outstanding Maturity 2) Coupon Rate 3) Market Price
The 6 percent annual coupon bonds of Greentree Inc are selling for 1020 have a face value of 1000 and have a yield to maturity of 5.43 percent How many years will it be until these bonds matu?
4 years
Why do bond prices and yields vary inversely?
Bonds are valued by discounting the coupon payments and the final repayment by the yield to maturity on comparable bonds. The bond payments discounted at the bond’s yield to maturity equal the bond price. You may also start with the bond price and ask what interest rate the bond offers. This interest rate that equates the present value of bond payments to the bond price is the yield to maturity. Because present values are lower when discount rates are higher, price and yield to maturity vary inversely.
Compute the current price of the bonds if the present yield to maturity is?
Compute the current price of the bond if percent yield to maturity is 7%
Will a bond's yield to maturity increase or decrease if a bond 's price increases?
as yield to maturity increases the bonds price decreases, because a higher yield to maturity means its riskier to investors
If two bonds have the same maturity the same yield to maturity and the same level of risk the bonds should they sell for the same price regardless of the bond's coupon rate?
if two bonds offer the same duration and yield, then an investor should look at their levels of convexity. if one bond has greater convexity, it is less affected by interest rate changes. also, bonds with higher convexity will have higher price than bonds with lower convexity regardless whether interest rates rise or fall. Ergo, investors will have to pay more with greater convexity due to the bond's lesser sensitivity to interest rate changes.
