Is the coupon rate or yield rate paid on a bond?
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If treasury bonds yield 6 percent and Carter's marginal income tax rate is 40 percent what yield on the Chicago municipal bonds would make Carter's treasurer indifferent between the two?
Answer . \nmuni yield must equal 10% to be equal to the tax shield 6 percent of the treasury yield. 100(muni yield) = 100(t-yield)/(1-(marginal tax))\n. \n100x = 100x .06/(1-.40)\n. \n100x = 100x .06/0.6 divide both side by 100\n. \nx = .06/0.6\n. \nx= 0.10\n. \nmuni rate equals 10%
What is the difference between rate and yield?
Answer . Rate is the specified interest rate paid on a financial instrument (such as a bond). The interest is calculated by applying the rate to the face value of the instrument.. The yield is calculated by dividing the interest amount received by the price paid for the investment, and the time held. So, if you bought a bond at a discounted price (below the face value), your yield would be higher than the rate. You buy a bond on Jan 1 with a face value of $1,000 and a stated rate of 5% (annual interest payment) at the discounted price of $950. On Dec 31, you receive $50 in interest (1,000 x 5%) which gives you a 5.26% yield (50/950).. Or, if you bought a bond for face value close to the coupon date, your yield would be higher than the rate. On July 1, you pay the face value of $1,000 for a bond with a stated rate of 5% and which matures on 12/31. You receive $1,050 , a $50 yield for 6 mos., for a 10% annual yield.
A 5-year corporate bond yields 8 percent a 5-year municipal bond of equal risk yields 6 percent the state tax rate is 0 at what federal tax rate are you indifferent between bonds?
To find the federal tax rate at which the buyer would be indifferent between Muni bonds(which are tax free) and Corporate bonds(which fall under your tax bracket tax rate) you follow this simple formula:. Corporate Bond Yield=(Municipal bond Yield)/(1- Federal tax rate). In this case you would solve for the Federal Tax Rate and get an answer of .25 or 25%. http://luhman.org/Nts/Bond/140_Municipals.html
How is coupon rate calculated on FRN instrument?
FRN are bonds that have variable coupon. The Floating Rate Notesare calculated by adding the spread to the fixed reference rate forthat day.
What is coupon rate?
Coupon rate is simply just the annual coupon payments paid by the issuer relative to the bond's face or par value. Coupon rate can be calculated by dividing the sum of the security's annual coupon payments and dividing them by the bond's par value. For example, a bond which was issued with a face value of $1000 that pays a $25 coupon semi-annually would have a coupon rate of 5%. Source: investopedia
What is the difference between the coupon rate and the interest rate?
Coupon rate is something that is paid semiannually. The interestrate is something that starts as soon as a bond is issued.
What is the difference between yield and coupon rate?
yield is the return on investment, for example dividend paid. coupon is the rate of interest related to bonds or debentures.
What is the face Value if maturity is 7 years Coupons are paid annually at rate of 5 and Yield to maturity is 7?
You're missing one of the following: . Coupon value . Bond present/purchasing value . As it stands, there's insufficient information.
What is the yield to maturity for a bond that has 10 years until maturity and a coupon rate of 8 sells for 1100?
YTM= 6.602%. ------------------------------------------------------------------------------------. I got a different answer, I got YTM 6.67% . 80 - 10 (80 coupon -100 cap loss / 10 years) __________________ 1,110 + 1,000 / 2 (purchase price + 1,000 par /2) . therefore, 70 / 1,050 = 6.67% (rounded) . the formula for YTM is: Coupon Rate + Cap gain OR - Cap loss (subtract for a premium bond as seen here) ____________________________ (divided by...) Purchase Price + 1,000 par / 2 . you'll get a decimal answer which you can x by 100 to get the decimal in the right place, then round. example, 0.066666 x 100 = 6.66666 round to 6.67%. . It's not as complicated as it looks, just memorize the formula =).
If a bond with face value of 1100 and a coupon rate of 8 is selling at a price of 970 is the bond's yield to maturity more or less than 8 and what is the current yield?
When a bond sells at a discount, the yield is higher than the coupon rate. Your income is 1,100 x 8% = 88. You invested 970. 88/970 = 9.07% yield.
A 6-year Circular File bond pays interest of 80 annually and sells for 950 What are its coupon rate current yield and yield to maturity?
Bond Pricing. A 6 year circular file bond pays interest of $80 annually, and sells for $950.. What are its coupon rate, Current yield, and yield maturity?
What is the rate of return for an investor who pays 1054.47 for a three-year bond with a 7 coupon and sells the bond one year later for 1037.19?
What is the cash conversion cycle for a firm with $3 millionaverage inventories, $1.5 million average accounts payable, areceivables period of 40 days, and an annual cost of goods sold of$18 million.
Do bonds with quarterly coupons have lower yields than those with semi-annual coupons?
Yields on bonds are independent of the frequency of coupon payment. The most used by professionals yield to worst (maturity or call date) depends only on the perceived riskiness of the bond and the supply and demand conditions for the bond.
If the yield curve is downward sloping what is the ytm on a 10 year Treasury coupon bond relative to that on a 1 year T-bond?
If the yield curve is downward sloping, the yield to maturity on a10-year Treasury coupon bond relative to that on a 1 year T-bond isthe yield on the 10 year bond. It will be less than the yield on a1-year bond.Ã
If you purchase a zero coupon bond today for 225 and it matures at 1000 in 11 years what rate of return will you earn on that bond to the nearest 10th of 1 percent?
Po =I (PVIFA kdn) + M(PVIF kdn). = $225 = $ 1,000 (PVIF) note 1 = 0 since this is a zero coupon bond.. (PVIFkd, ) =0.317
Do bonds with larger coupons have greate interest rate risk tan do bonds with smaller coupons?
No - the lower the coupon the higher the interest rate risk. The low coupon indicates it will take longer for bondholder to have capital returned, so money is at risk longer. Higher coupon suggests faster return of capital and thus a reduction of risk. Investopedia has some nice material on bond duration.
What is the relationship between coupon rate on a bond and security provisions?
Coupon Rate: The actual interest rate on the bond, usually payable in semiannual installments. The coupon rate normally stays constant during the life of the bond and indicates what the bondholder's annual dollar incomes will be. Bond Security Provisions: . Secured Debt: Specific assets are pledged to bondholders in the event of default (inability to pay the debt). . Mortgage Agreement: Real property is pledged as a security (collateral) for the loan. . After-acquired property clause: Requires any new property to be placed under the original mortgage. Specific security provisions can determine the coupon rate. Due to the specific asset claims in a secured bond most companies will opt for the unsecured debt as it will give the bondholder a claim against the corporation as oppose to a lien against an asset.
Jill bought a bond with face value of 1000 the bond has a coupon rate of 6 what is the current yield if the market price of the bond is 1027?
By definition itself, Current yield of this bond 6% of 1000/1027=60/1027=5.84%...... hope it solves ur doubt
What is relationship between a bond coupon rate and its duration?
bond coupon rates and yield rates have very similar effects and a very similar relationship to duration, lemme explain, by first explain durations effects in relation to interest rates, then yields and finally you can surmise that relationship between yield rates will be the same as coupon rates . Duration can be seen as the elasticity of the bond's price with respect to interest rates. When duration is 7, a 15 year bond will fall 7% in value if interest rates increase by 1%. In the data we've generated we can also determine the relationship between yields and duration by analyzing the change after a 50 basis point decrease in rates. The duration will rise as yields are lowered, and conversely a high coupon rate or high yield will result in lower durations. While a higher yield reduces the present value of all the bond's payments, it reduces the value of payments further in the future by a greater proportional amount. This amounts to a reduction in duration. Merck & Company's bond has the highest yield and therefore one would surmise that the duration for MRK should be lower than the other bonds, this is only true if all other variables are held equal (ceteris paribus). This is not the case. The bonds have wildly different coupons remaining. Eli Lilly's bond has a similar number of coupons remaining-suggesting a relatively good candidate for comparison-and a lower yield than MRK, leading one to expect LLY bond to have a higher duration than MRK. An astute financial student would discourage this comparison, citing that LLY exhibits the highest (7.125%) annual coupon rate, which would in turn reduce the duration. While comparisons between bonds will fail us due to their unique characteristics, it is easy to see the change when examining a single bond and the effect of a 50 basis point decrease in rates has on the bond's duration. Every single bond's duration rose, relative to itself before the basis change, as their yields were lowered. This helps prove our assumption of the inverse relationship between yield and duration.
What's the dividend yield capital gains yield and the expected rate return of the stock with preferred stock at eight dollar annual dividend to be paid in perpetuity a discount rate is twelve percent?
Dividend yield . The dividend yield on a company stock is the company's annual dividend payments divided by its market cap, or the dividend per share divided by the price per share. It is often expressed as a percentage. . Contents\ . 1 Preferred share dividend yield . 2 Common share dividend yield . 3 History . 4 Related Reference . 5 Dow Industrials . 6 S&P 500 . 7 See also . 7.1 Lists . 8 External links .  Preferred share dividend yield . Dividend payments on preferred shares are stipulated by the prospectus. The company will typically refer to a preferred share by its initial name which is the yield on its original price --- for example, a 6% preferred share. However, the price of preferred shares varies according to the market so the yield based on the current price fluctuates. Owners of preferred shares calculate multiple yields to reflect the different possible outcomes over the life of the security.. current yield is the $Dividend / Pfd share current price. . Since the share may be purchased at a lower (higher) cost than its final redemption value, holding it to maturity will result in a capital gain (loss). The annualized rate of gain is calculated using the Present value of a dollar calculation. ('PV' is the current stock price. 'FV' is the redemption value. 'n' is the number of years to redemption. Solve for the interest rate 'r'.) The yield to maturity is the sum of this annualized gain (loss) and the current yield. . There are other possible yields discussed at Yield to maturity. .  Common share dividend yield . Unlike preferred stock, there is no stipulated dividend for common stock. Instead, dividends paid to holders of common stock are set by management, usually in relation to the company's earnings. There is no guarantee that future dividends will match past dividends or even be paid at all. Due to the difficulty in accurately forecasting future dividends, the most commonly-cited figure for dividend yield is the current yield which is calculated using the following formula:. For example, take a company which paid dividends totaling $1 last year and whose shares currently sell for $20. Its dividend yield would be calculated as follows:. Rather than use last year's dividend, some try to estimate what the next year's dividend will be and use this as the basis of a future dividend yield. Such a scheme is used for the calculation of the FTSE UK Dividend+ Index . It should be noted that estimates of future dividend yields are by definition uncertain..
Why do the coupon rates for various bonds vary so much?
Coupon rates are likely to vary when they are being traded in different markets with different interest rates. There will also be a variation in rates due to the different risk levels of of different bonds.
Will a bond's yield to maturity increase or decrease if a bond is downgraded by rating agencies?
it will increase due to increase in risk. The bigger the risk the bigger the return and of course more chances of losing big as well.
If two bonds have the same maturity the same yield to maturity and the same level of risk the bonds should they sell for the same price regardless of the bond's coupon rate?
if two bonds offer the same duration and yield, then an investor should look at their levels of convexity. if one bond has greater convexity, it is less affected by interest rate changes. also, bonds with higher convexity will have higher price than bonds with lower convexity regardless whether interest rates rise or fall. Ergo, investors will have to pay more with greater convexity due to the bond's lesser sensitivity to interest rate changes.
Is zero coupon bond more sensitive to change in interest rate than fixed coupon bond?
The zero coupon bond is more sensitive to change in rate (inflation) because the market value is not based on a fixed coupon.
Difference enters bond's coupon interest rate the current yield y bond-holder's required rate of return?
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return? .
A corporation with a marginal tax rate of 34 percent would receive what after-tax dividend yield on a 12 percent coupon rate preferred stock bought at par assuming a 70 percent dividend exclusion?
A corporation with a marginal tax rate of 34 percent would receive what after-tax dividend yield on a 12 percent coupon rate preferred stock bought at par assuming a 70 percent dividend exclusion?
What is the difference between discount rate and coupon rate?
For this answer we have to know the six categories of premioum: a. Inflation premium(more risk): high inflation means tha investors will require a higher return in order to invest at a certain project. b. Maturity premium: the longer the duration of a project, the higher the return that investors will require. c. Liquidity premium: the excess return that investors will require in order to invest their capital in a less desirable project on a secondary market. d. Exchange rate risk premium: the excess return that investors will require in order to invest their capital in a foreign financial assets that has volatile exchange rate. e. default risk premium: .... in order to invest in a more (??) project to default company f. Real rate of interests
What are the contract rate and the market rate for bonds?
Contract rate is known as a coupon rate (because older securities actually had coupons that were clipped and sent to paying banks for periodic interest). It is the fixed rate of interest for which a particular bond was issued. Market rate is actually known as yield (prevailing interest rate for new bonds) and yields change with prevailing interest rates. Yields are closely aligned with prevailing interest rates.
How does the yield to maturity on a bond differ from the coupon yield or current yield?
The rate of return anticipated on a bond if held until the end ofits lifetime. YTM is considered a long-term bond yield expressed asan annual rate. The YTM calculation takes into account the bond'scurrent market price, par value, coupon interest rate and time tomaturity. It is also assumed that all coupon payments arereinvested at the same rate as the bond's current yield. YTM is acomplex but accurate calculation of a bond's return that helpsinvestors compare bonds with different maturities and coupons.
Why are convertibles and bonds with warrants typically offered with lower coupon than similarly rated straight bonds?
The reason for this is because convertibles and warrant bonds can be called in at any time. This means that the person holding the bond can demand cash from the entity that issued the bond. This poses a risk for the issuer because and increases liquidity for the holder. Thus you see lower rates.
If a coupon bond is selling at par does the current yield equal its yield to maturity?
Yield usually refers to yield to maturity. If a bond is trading at par it usually means the yield to maturity is equal to the coupon.
Difference between coupon rate and yield to maturity?
The coupon rate is the actually stated interest rate. This is the rate earned on a NEW issue bond. The yield to maturity takes into consideration the purchase price of a bond bought in the secondary market. For example, if you buy a $1,000 bond for $1100 which matures in 10 years and has a coupon of 5%, your coupon is 5%, but your yield to maturity would be closer to 4% because you paid $1100, but will only get back $1,000 at maturity (losing $100). The "loss" reduces the return.
What is the Difference between coupon rate and required return of a bond?
The difference between the coupon rate and the required return of abond is dependent upon the type of bond. Junk bonds will have thebiggest difference between its return and the coupon rate.
What must be held constant among bonds whose interest rates are shown on a yield curve?
What must be held constant among the bonds whose interest rates are shown on yield curve
Are interest rate and coupon rate the same?
Actually they mean the same thing but they are used in two totally different situations. Interest Rate is the money paid by a bank that has accepted a deposit from a Customer. Coupon Rate is the money paid by a person who has issued Bonds to people in return for the money they have given him.
What is the rate of return for an investor who pays 1054.47 for a 3-yr bond with a 7 percent coupon and sells the bond one year later for 1037.19?
Merton Enterprises has bonds on the market making annual payments,with 16 years to maturity, and selling for $1,051. At this price,the bonds yield to maturity is 6.8%. What must the coupon rate beon Merton's bonds? (Coupon is paid annually.)
Will a bonds yield to maturity increase or decrease if the bond is downgraded by the rating agencies?
Changing of rating, in and of itself, will not affect the yield, but more generally, a more negative market view will see the yield rise and the price fall.
What is the relationship between coupon rate and bond price?
The Bond price is the amount of the bond when it becomes mature. The coupon rate is the amount of interest payable on the bond. Bonds have three major components The first is the face value (also called par value). This is the value of the bond as given on the certificate or instrument. This is the value the bond holder will receive at maturity unless the issuer defaults. If bonds are retired before maturity, bond holders may receive a slight premium over face value. Investors pay par when they buy the bond at its original face value. The price investors pay may be more or less than the face value. Bonds also have a coupon rate. This is the annual rate of interest payable on the bond. For the owner of a bond, the higher the coupon rate, the higher the interest payments the owner receives. The rate is set at the time the bond is issued and generally does not change. Most bonds make interest payments semiannually, although some bonds are offered with monthly and quarterly payments. Did you know? Until 1983, all bond owners received an actual paper bond certificate. This inspired bond terminology. The loan amount appeared prominently on the face of the bond. Bonds included coupons that the owner detached, one Price and interest rate on a bond are inversely related, if the bond price is low, rate will be high, if the bond price is high, interest rate will be lower.
At what rate are concrete masons paid?
Cement masons and concrete finishers earned an average hourly wage of $14.74, while terrazzo workers earned $13.42 per hour
Who determines the rate of interest paid on a bond?
Bonds have a predetermined rate of interest called the stated or contract rate, which is established by the board of directors.
Relationship between required rate of return and coupon rate on the value of a bond?
required rate of return is the 'interest' that investors expect from an investment project. coupon rate is the interest that investors receive periodically as a reward from investing in a bond
What are the interest rates for zero coupon bonds?
They pay no 'coupon' which is the income paid periodically. You make a return by buying at a discount. As an example, if you buy a zero coupon bond for $86.26, maturing at $100 over 5 years, you would earn 3% p.a.
Are basketball paid an hourly rate?
Yes, many basketballs are, however I would suggest being a baseball or football, because their rates are typically higher.
Do higher coupon bonds give a higher rate of return?
according to the come rates the returns we get if we purchase higher rated coupon bonds we get higher returns
When does coupon rate exceed coupon yield?
There are a lot of sites that provides coupon codes on onlineshopping or ordering food. I'm using CouponLocate.com that offersamazing coupons and cashback as well on your shopping. You can usethat cashback as a free recharge. Try this once.
When the market rate of return for a particular bond is much less than its coupon rate the bond is selling at?
If the current interest rate is lower than the coupon rate, a bondwill be priced at a premium. For example, a bond originally issuedat par with a 5% coupon would initially yield 5% to an investor. Ifmarket rates subsequently dropped to 3%, the bond would be sellingat a premium to reflect the lower interest rate. In this example,the original bond sold for $1,000 and had a coupon rate of 5% toyield $50 per year in interest. If interest rates dropped to 3%,the price of the bond would increase to approximately $1,667. Apurchaser of the bond would still receive $50 per year in interestwhich would provide an annual yield of 3% ($50/$1,667 = 3.0%).
What one of these is not usually associated with bonds a coupon rate b maturity value c face amount d maturity rate?
Coupons, face amount, maturity value and maturity rate all areassociated with bonds. Coupons are a type of bond and the faceamount tells how much the coupon is worth until it matures, gaininginterest.
What happen when the yield to maturity on a bond is greater than the coupon rate?
When the yield of a bond exceeds it coupon rate, the price will be below 'par' which is usually $100.
Where can one find a Bond funds that yield a high interest rate?
You can find the interest rates on Bond funds by looking up the bond you are interested in sites such as Bloomberg and Yahoo Finance. If you want to sort them out by interest rate (e.g. highest first) then you can do that too.
Where can high yield CD rates be found?
One can find high yield CD rates on many different websites. The sites Bankrate and Bankaholic both compare several different Certificate of Deposit rates.