Read everything about it here. Keeping this in view, what is the relationship between coupon rate and yield to maturity?
The coupon rate represents the actual amount of interest earned by the bondholder annually while the yield to maturity is the estimated total rate of return of a bond, assuming that it is held until maturity.
Also Know, can we have a current yield greater than YTM If yes when does it happen? When a bond's market price is above par, which is known as a premium bond, its current yield and YTM are lower than its coupon rate. Conversely, when a bond sells for less than par, which is known as a discount bond, its current yield and YTM are higher than the coupon rate.
Also know, how do you calculate yield to maturity on a premium bond?
Yield to maturity (YTM) = [(Face value/Present value)1/Time period]-1. If the YTM is less than the bond's coupon rate, then the market value of the bond is greater than par value ( premium bond). If a bond's coupon rate is less than its YTM, then the bond is selling at a discount.
What is the difference between the following yields coupon rate current yield yield to maturity?
The coupon rate is the earnings an investor can expect to receive from holding a particular bond. At the time it is purchased, a bond's yield to maturity and coupon rate are the same. The bond's yield to maturity rises or falls depending on its market value and how many payments remain to be made.
