Markets · 6 pages · 12 min

How a coupon differs from the yield

The coupon is the bond's stated payment; the yield depends on the price a buyer actually pays.

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From the opening

The coupon is the interest the bond contract says the issuer will pay, usually a fixed rate applied to the face amount. The yield is what a buyer earns in the calculation that starts from the price actually paid and counts the coupons and the principal still to come. The opening covers coupon is fixed in the contract, yield moves when the price moves, and a premium pulls yield below coupon.

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Inside

Coupon is fixed in the contract
Yield moves when the price moves
A premium pulls yield below coupon
A discount lifts yield above coupon
Where the idea stops applying
A distinction worth keeping

Sources

Coupon rate of a bond
Yield to maturity versus coupon

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How a coupon differs from the yield

From the opening

Inside

Sources

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