What would you like to do?
Why do the coupon rates for various bonds vary so much?
Coupon rates are likely to vary when they are being traded in different markets with different interest rates. There will also be a variation in rates due to the different risk levels of of different bonds.
12 people found this useful
Was this answer useful?
Thanks for the feedback!
Too many wolves.
Coupon Rate: The actual interest rate on the bond, usually payable in semiannual installments. The coupon rate normally stays constant during the life of the bond and indicate…s what the bondholder's annual dollar incomes will be. Bond Security Provisions: Secured Debt: Specific assets are pledged to bondholders in the event of default (inability to pay the debt).Mortgage Agreement: Real property is pledged as a security (collateral) for the loan.After-acquired property clause: Requires any new property to be placed under the original mortgage. Specific security provisions can determine the coupon rate. Due to the specific asset claims in a secured bond most companies will opt for the unsecured debt as it will give the bondholder a claim against the corporation as oppose to a lien against an asset.
bond coupon rates and yield rates have very similar effects and a very similar relationship to duration, lemme explain, by first explain durations effects in relation to… interest rates, then yields and finally you can surmise that relationship between yield rates will be the same as coupon rates Duration can be seen as the elasticity of the bond's price with respect to interest rates. When duration is 7, a 15 year bond will fall 7% in value if interest rates increase by 1%. In the data we've generated we can also determine the relationship between yields and duration by analyzing the change after a 50 basis point decrease in rates. The duration will rise as yields are lowered, and conversely a high coupon rate or high yield will result in lower durations. While a higher yield reduces the present value of all the bond's payments, it reduces the value of payments further in the future by a greater proportional amount. This amounts to a reduction in duration. Merck & Company's bond has the highest yield and therefore one would surmise that the duration for MRK should be lower than the other bonds, this is only true if all other variables are held equal (ceteris paribus). This is not the case. The bonds have wildly different coupons remaining. Eli Lilly's bond has a similar number of coupons remaining-suggesting a relatively good candidate for comparison-and a lower yield than MRK, leading one to expect LLY bond to have a higher duration than MRK. An astute financial student would discourage this comparison, citing that LLY exhibits the highest (7.125%) annual coupon rate, which would in turn reduce the duration. While comparisons between bonds will fail us due to their unique characteristics, it is easy to see the change when examining a single bond and the effect of a 50 basis point decrease in rates has on the bond's duration. Every single bond's duration rose, relative to itself before the basis change, as their yields were lowered. This helps prove our assumption of the inverse relationship between yield and duration.
The difference between the coupon rate and the required return of a bond is dependent upon the type of bond. Junk bonds will have the biggest difference between its return… and the coupon rate.
That would depend on the specifics of the individual bond.
Why does the price of receptacles vary so much and what is the difference in the performance of the various receptacles?
Im assuming that since you have asked the question exactly like in the PK certification manual. You must work for home depot
currently it is 7.8%
The Bond price is the amount of the bond when it becomes mature. The coupon rate is the amount of interest payable on the bond. Bonds have three major components The first… is the face value (also called par value). This is the value of the bond as given on the certificate or instrument. This is the value the bond holder will receive at maturity unless the issuer defaults. If bonds are retired before maturity, bond holders may receive a slight premium over face value. Investors pay par when they buy the bond at its original face value. The price investors pay may be more or less than the face value. Bonds also have a coupon rate. This is the annual rate of interest payable on the bond. For the owner of a bond, the higher the coupon rate, the higher the interest payments the owner receives. The rate is set at the time the bond is issued and generally does not change. Most bonds make interest payments semiannually, although some bonds are offered with monthly and quarterly payments. Did you know? Until 1983, all bond owners received an actual paper bond certificate. This inspired bond terminology. The loan amount appeared prominently on the face of the bond. Bonds included coupons that the owner detached, one Price and interest rate on a bond are inversely related, if the bond price is low, rate will be high, if the bond price is high, interest rate will be lower.
because the earth line is always near deserts that's ends it
i guess debenture, since its more riskier!
They pay no 'coupon' which is the income paid periodically. You make a return by buying at a discount. As an example, if you buy a zero coupon bond for $86.26, maturing at $10…0 over 5 years, you would earn 3% p.a.
according to the come rates the returns we get if we purchase higher rated coupon bonds we get higher returns
When the market rate of return for a particular bond is much less than its coupon rate the bond is selling at?
If the current interest rate is lower than the coupon rate, a bond will be priced at a premium. For example, a bond originally issued at par with a 5% coupon would initial…ly yield 5% to an investor. If market rates subsequently dropped to 3%, the bond would be selling at a premium to reflect the lower interest rate. In this example, the original bond sold for $1,000 and had a coupon rate of 5% to yield $50 per year in interest. If interest rates dropped to 3%, the price of the bond would increase to approximately $1,667. A purchaser of the bond would still receive $50 per year in interest which would provide an annual yield of 3% ($50/$1,667 = 3.0%).
Zero Coupon Municipal Bonds are special because, unlike other bonds, they have no periodic interest payments. Rather, the investor receives one payment at maturity. This payme…nt is equal to the amount invested, plus the interest earned, compounded semiannually.