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what is the difference between ytm and coupon rate of a bond .

what is the difference between ytm and coupon rate of a bond .

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Answer #1

Coupon rate is the stated rate of interest on a bond while YTM or yield to maturity is the actual yield earned on the bond. The difference in two numbers is because of the redemption and issue value of bond.

If the redemption value is same as issue price i.e. par value, coupon rate and ytm will be same

If it is different, the difference between redemption price and issue price will also be earned on the bond along with coupon payments and hence, ytm will be higher than the coupon rate.

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