curves are more convex than the price-yield curves for smaller maturity bonds. There's a lot to learn, but the difference between coupon and yield to maturity is a good place to start. Heres how it works. (True/False true, the yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments equal to the price of the bond. Therefore, the relationship of the coupon rate and the market yield depends upon the market price of the bond. This can be explained by the fact that the discount rate and coupon rate are different.

#### How does a bond s coupon interest rate affect its price

For the 10-year bond, the percentage increase in price would.55 (1,000 938.55 938.55, whereas the percentage increase for the 1-year bond would be only.9. Thus, the second bond relationship to note is that there is an inverse relationship between the price and rate of return on a bond. Yield to maturity will be equal to coupon rate if an investor purchases the company's stock at par value. When the market price is greater than face value, then the market yield of that bond will be less than the coupon rate. Vanilla bonds have coupon payments that are fixed for the life of the bond, with the principal being repaid at maturity. Moody's investors service (Moody's) -Standard and Poor's (S P) term structure of interest rates refers to what relationship? Prices and yields move in opposite directions. In this case, that would be 1,333.33 because 20 divided by 1,333.33 equals.5 percent. . Interest rates rise, prices? Treasury might issue a 30-year bond in 2017 that's due in 2047 with a coupon of 2 percent. In contrast, if the coupon rate is equal to the discount rate (i.e., R 9), then the bond's value would be equal to its par value, Vob.

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