Coupon Rate vs Yield to Maturity: Impact on Bond Pricing
The coupon rate is the interest rate paid throughout the bond’s life, and it’s fixed over time. For example, a bond with a 2% coupon rate pays $20 to the bondholder until its maturity. To illustrate this, let’s consider a bond that pays a coupon rate of 2.5%. If interest rates rise, the bond’s price … Read more