Corporate Finanace

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Joined: Mon Nov 17, 2014 4:13 am

Corporate Finanace

Postby kumar.hemant » Thu Nov 20, 2014 8:25 am

So if I understand correctly, when the coupon rate is fixed then there would be no difference between coupon rate and YTM?? It's only when bonds are issued on floating rates then there would be difference?

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Corporate Finanace

Postby edupristine » Fri Nov 21, 2014 7:07 am

When the coupon rate is fixed and it's equal to YTM. Hence it means bond is issued on par but it is not necessary always for example:- Coupon rate = 8%(annually), YTM =10%, Face value= 100, N=5, Price of bond= 92.4. In such example coupon rate is fixed but not equal to YTM.
Floating rate bonds have a variable coupons which is adjusted towards market reference rate.

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