And what coupon rate is better when it comes to short and long maturities of bonds for instance and why?
2007-09-06 13:56:02 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
Yes. When you buy a bond it states the coupon (interest) rate up front and you will get that nominal amount of money "no matter what". Of course bonds can fluctuate and its value will change but you will get the same amount of money regardless. What does change is the dividend yield or just yield which is basically the amount of money paid to you as a percentage of the bond value. Therefore the bond value changes, the yield changes, but you will get the same $50 per quarter or whatever regardless. My $0.02
2007-09-06 20:25:07 · answer #1 · answered by D 3 · 0⤊ 0⤋
The coupon rate is the interest rate on the face value of the bond.
If a bond that has a face value of $1,000 and it is paying $40 per year, then the coupon rate is 4%. If the same bond with the same coupon rate of 4% is selling for $900, the coupon rate doesn't change, but the bond is yielding 4.44%
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2007-09-06 14:52:10 · answer #2 · answered by Robert L 7 · 0⤊ 0⤋