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Impact of Coupon Rate on Bond Price Changes

The document explains the relationship between yield to maturity (YTM) and bond prices in relation to coupon rates. It states that for bonds with higher coupon rates, the percentage change in price due to changes in YTM is smaller compared to bonds with lower coupon rates. This relationship holds true when other factors such as face value, market price, required rate of return, and period remain constant.

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Priya Raj
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3 views1 page

Impact of Coupon Rate on Bond Price Changes

The document explains the relationship between yield to maturity (YTM) and bond prices in relation to coupon rates. It states that for bonds with higher coupon rates, the percentage change in price due to changes in YTM is smaller compared to bonds with lower coupon rates. This relationship holds true when other factors such as face value, market price, required rate of return, and period remain constant.

Uploaded by

Priya Raj
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

FOR ANY CHANGE IN YTM, THE PERCENTAGE CHANGE PRICE CHANGES IN CASE OF BONDS OF A

HIGHER COUPON RATE, WILL BE SMALLER THAN IN THE CASE OF BONDS OF A LOW COUPON RATE,
OTHER THIS REMAINING THE SAME

THAT IS, YTM WILL CHANGE

WHEN COUPON RATE IS↑ THE PERCENTAGE CHANGE IN PRICE IS ALSO↑

AND

WHEN COUPON RATE IS↓ THE PERCENTAGE CHANGE IN PRICE IS ALSO↓

WHEN THE OTHER FOLLOWING THINGS REMAINS SAME

FACE VALUE

MARKET PRICE

REQUIRED RATE OF RETURN

PERIOD

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