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Does the yield to maturity on a premium bond exceed the bond's coupon rate?
No, the yield to maturity (YTM) on a premium bond does not exceed the bond's coupon rate. A premium bond is sold for more than its face value, which means the YTM will be lower than the coupon rate because the investor will receive the fixed coupon payments but will incur a loss when the bond matures and is redeemed at face value. Thus, the YTM reflects this lower return compared to 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.
Is the current yield greater than the coupon rate for a discount bond?
yes
Explain the relationship between coupon rate and the yield to maturity?
The coupon rate is the fixed annual interest payment a bondholder receives based on the bond's face value, while the yield to maturity (YTM) represents the total return anticipated on a bond if held until its maturity, factoring in the bond's current market price, coupon payments, and time to maturity. When a bond's market price is below its face value, the YTM is higher than the coupon rate, indicating a better return for investors. Conversely, if the bond's market price is above its face value, the YTM is lower than the coupon rate. Therefore, the relationship between the two is inversely related to the bond's market price.
What happens when a bond YTM is less than it's coupon rate?
When a bond's yield to maturity (YTM) is less than its coupon rate, the bond is trading at a premium. This means that investors are willing to pay more than the bond's face value because the coupon payments are more attractive compared to current market interest rates. As a result, the bondholder receives higher periodic interest payments than what is available in the market, making the bond more valuable. Over time, the bond's price will decrease as it approaches maturity, aligning its yield with the prevailing market rates.
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.....
Does the yield to maturity on a premium bond exceed the bond's coupon rate?
No, the yield to maturity (YTM) on a premium bond does not exceed the bond's coupon rate. A premium bond is sold for more than its face value, which means the YTM will be lower than the coupon rate because the investor will receive the fixed coupon payments but will incur a loss when the bond matures and is redeemed at face value. Thus, the YTM reflects this lower return compared to the coupon rate.
Is the coupon rate or yield rate paid on a bond?
Coupon rate
What is the stated rate of interest if a bond is sold at 98?
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
When market interest rates exceed a bond's coupon rate the bond will?
When market interest rates exceed a bond's coupon rate, the bond will:
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.
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.
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?
How do you calculate a bonds coupon rate Par Value 1000 Sold for 964 years to maturity 8. Yield 6.7 and its annual.?
The coupon rate of a bond can be calculated using the formula: Coupon Rate = (Annual Coupon Payment / Par Value) x 100%. First, determine the annual coupon payment using the yield and the bond's price. Since the bond's price is $964 and the yield is 6.7%, the annual coupon payment can be estimated by multiplying the yield by the bond's price: $964 x 0.067 = $64.53. Thus, the coupon rate is ($64.53 / $1000) x 100% = 6.45%.
Is the current yield greater than the coupon rate for a discount bond?
yes
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.
