## The yield to maturity is greater than the coupon rate when the bond price is

## The yield to maturity (YTM), book yield or redemption yield of a bond or other fixed-interest security, such as gilts, is the (theoretical) internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond is held until maturity, and that all coupon and If a bond's coupon rate is less than its YTM, then the bond is selling at a

In the described example coupon rate (r) is greater than YTM. If r

### The yield to maturity only equals the coupon rate when the bond sells at face value. The bond sells at a discount if its market price is below the par value, and in such a situation, the yield to maturity is higher than the coupon rate. A premium bond sells at a higher price than the face value, and its yield is lower than the coupon rate.

If an investor purchases a bond for its par value, the yield to maturity is equal to the coupon rate. If the investor purchases the bond at a discount, its yield to maturity is always higher than

### Bond Price Function. The price or market value of an investment bond is based on the rate of interest the bond pays -- called the coupon rate -- compared to the current market yield for similar bonds.

The yield to maturity only equals the coupon rate when the bond sells at face value. The bond sells at a discount if its market price is below the par value, and in such a situation, the yield to maturity is higher than the coupon rate. A premium bond sells at a higher price than the face value, and its yield is lower than the coupon rate. When you buy a bond, an important part of your return is the interest rate that the bond pays. However, yield to maturity is a more accurate representation of the total return you'll get on your investment. Yield to maturity is a figure that incorporates both the bond's interest rate and its price. The bond price is most likely to change by less than 4% as the relationship between the bond’s price and the market discount rate is not linear (convexity effect). Reading 44 LOS 44b: Identify the relationships among a bond’s price, coupon rate, maturity, and market discount rate (yield-to-maturity) Is the current yield greater than the coupon rate for a If a bond with face value of 1100 and a coupon rate of 8 is selling at a price of 970 is the bond's yield to maturity more or less Question: If The Yield To Maturity On A Bond Is Greater Than The Coupon Rate, You Can Assume: A. The Price Is Below The Par B. Risk Premiums Have Decreased C. The Price Is Above The Par D. Interest Rates Have Decreased Because the coupon payments on a bond priced at a discount are smaller than on a bond priced at a premium, if we use the same discount rate to price each bond, the bond with the smaller coupon

## Let's look at a bond with a $1,000 par value, a 5% coupon rate and 3 years to maturity. If you buy this bond at $950, your YTM would be 6.9%, higher than the 5% on offer if you As you can see, the lower the bond price, the higher the YTM .

Bonds with a price greater than par value. The yield to maturity of a _____ bond is less than its coupon rate. Discount bonds. Bonds with a price less than par value. The yield to maturity of a _____ bond is greater than its coupon rate. Par bonds. If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850. The bond's yield to maturity is greater than its coupon rate. If a bond's yield to maturity exceeds its coupon rate, the bond will sell at par. All else equal, if a bond's yield to maturity increases,

If an investor purchases a bond at par value or face value, the yield to maturity is equal to its coupon rate. If the investor purchases the bond at a discount, its yield to maturity will be higher A bond's coupon rate is the rate of interest it pays annually, while its yield is the rate of return it generates. A bond's coupon rate is expressed as a percentage of its par value. The par value Bonds with a price greater than par value. The yield to maturity of a _____ bond is less than its coupon rate. Discount bonds. Bonds with a price less than par value. The yield to maturity of a _____ bond is greater than its coupon rate. Par bonds.