![]() ![]() The coupon rate is equal to the yield of maturity.The prices and yield are inversely related to each other.No matter at whichever price the bond is traded, the coupons are fixed.Coupon Rate or Nominal Yield = Annual Payments / Face Value of the Bond.The yield of maturity defines how much you will be paid in the future.Coupon gives all the information like what bond is paid and when it was issued.The market price keeps on changing so it’s better to purchase a bond at a discount which represents a larger share of the purchase price.The coupon amount remains the same till its maturity.The current yield compares the coupon rate to the market price of the bond.Interest rate fluctuates in the coupon rate.The current Yield defines the rate of return it generates annually.The rate of interest is paid annually at a coupon rate.The yield of maturity means the total return earned by the investor until it’s maturity.The amount paid by the issuer to the bondholder until it’s maturity is called coupon rate.Here’s look at the other major differences between coupon rate and yield of maturity: The above example shows the inverse relationship between yield to maturity and the price of the bond. A Price That’s Higher Than The Face Value (I.E.A Price That’s Lower Than The Face Value (I.E.Let’s look at how coupon rate and yield of maturity reacts in different situations: Assume that there’s a bond with a face value of RS 20,000 with a 20% coupon rate. ![]() Here’s another example that clearly tells the difference between coupon rate and yield of maturity. However, in the case of the yield of maturity, it changes depending on several factors like remaining years till maturity and the current price at which the bond is being traded. ![]() The major difference between coupon rate and yield of maturity is that coupon rate has fixed bond tenure throughout the year. ![]()
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