0

How does the periodicity of Coupon Payment affect the YTM of a bond? For example, if I buy a bond that pays 10% Coupon Semi-Annually whose Face Value is 100, and if the same bond pays 10% Annually, what is the difference between those two bonds and does the YTM change. In first case will I get 5% paid twice and in second case I will get paid 10% once. Does YTM change in both cases?

0

The total cash-flows received from owning the two bonds is the same. However, the semi-annual bond pays slightly quicker. Quicker payment of the same total cash-flows results in a higher yield.

  • Thanks! Thanks again! – Muthu Vivek Oct 20 at 23:22

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.