11 lines
497 B
Markdown
11 lines
497 B
Markdown
**(Annual Coupon / Current Price) × 100**
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(Relating to example in questions asked)
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Notice it's higher than the coupon rate (6%) because the bond is trading _below_ par — you're paying less but still getting the same $6 coupon, so your yield is higher.
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The key relationship to remember:
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- Bond trading **below par** → Current yield **above** coupon rate
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- Bond trading **above par** → Current yield **below** coupon rate
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- Bond trading **at par** → Current yield **equals** coupon rate |