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- Coupon Rate Definition & Example | InvestingAnswers.
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- The Difference Between a Bond's Yield Rate and Its Coupon Rate!
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- How it works (Example):.
All Rights Reserved. Several coupons, one for each scheduled interest payment, were printed on the certificate.
At the date the coupon was due, the owner would detach the coupon and present it for payment an act called "clipping the coupon". The certificate often also contained a document called a talon , which when the original block of coupons had been used up could be detached and presented in exchange for a block of further coupons.
Not all bonds have coupons. Such bonds make only one payment: Normally, to compensate the bondholder for the time value of money , the price of a zero-coupon bond will always be less than its face value on any date before the maturity date.
When is a bond's coupon rate and yield to maturity the same?
During the European sovereign-debt crisis , some zero-coupon sovereign bonds traded above their face value as investors were willing to pay a premium for the perceived safe-haven status these investments hold. The difference between the price and the face value provides the bondholder with the positive return that makes purchasing the bond worthwhile. Between a bond's issue date and its maturity date also called its redemption date , the bond's price is determined by taking into account several factors, including:.
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Principles in Action. Upper Saddle River, New Jersey Pearson Prentice Hall. New York Times.