How Bond Discounts Increase Yield Without Changing Coupons
Summary
Hollow Point Trading shares a short explainer on how a bond discount affects yield without changing its fixed coupon. Using a $1,000 bond with a 5% annual coupon, the announcement compares the $50 yearly payment at face value and at a $900 purchase price, clarifying an important bond-investing concept.
https://youtu.be/YkyGYrKIv9k
A bond discount changes yield without changing coupon #Shorts
A lower purchase price does not rewrite a fixed coupon. Imagine a bond with one thousand dollars of face value and a five percent annual coupon. It pays fifty dollars a year, assuming the issuer makes the promised payments. At a purchase price of one thousand dollars, that fifty dollars is a five percent current yield. At nine hundred dollars, t...
