Coupon Amount and Coupon Yield

Coupon Amount and Coupon Yield

Please note that CouponThe interest paid on a bond expressed as a percentage of the face value. If a bond carries a fixed coupon, the interest is paid ..... amount is the sum of money the bond A negotiable certificate evidencing indebtedness -a debt security or IOU, issued by a company, municipality or government agency. A bond investor lends money to the ..... holder receives as an interest payment at fixed intervals. Coupon Yield is the return that investor receives on his investment.

Coupon Amount = Face ValueThe value that appears on the face of the scrip, same as nominal or par value of share/debentures. X Coupon rateThe interest rate stated on the face of coupon. Cover (1) To take out a forward foreign exchange contract. (2) To close out a short .....

For example, in a 2021 GOI 6.50% security which has a face value of ` 1000, the investor will get the following:

• 1000 x 6.5% = ` 65 annually in the form of ` 32.5 every six months.
• ` 1000 back in 2021.

The Yield of the Bond is denoted as percentage of the Bond's price at any point of time. It is denoted as following:

Coupon Yield % = (Coupon Amount / Price ) x 100.

In the above example, the face value is equal to the bond value i.e. ` 1000, so the Yield of Coupon will also be same i.e. 6.5%. But if the face value of the Coupon goes down, the coupon yield goes up. For example if we consider that the same bond has a value of ` 800, the yield of Bond will be as follows:

(65/800)x 100 = 8.125%

Similarly, if the value of the bond goes up, say ` 1200, then the Yield of the Bond will be as follows:

(65/1200)X100 = 5.416 %.

• For a given coupon amount, the Yield of the Bond is inversely proportional to its price.