Interest rates and prices · Question 6 of 12
Why does a bond's yield often differ from its coupon?
1 answer is correct. Easy
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Answer
- B Because the purchase price can differ from the nominal value
Explanation
The yield takes into account not only the interest but also the difference between the purchase price and repayment. Anyone who buys below 100 receives more than the coupon, anyone who buys above 100 less. Only when buying at exactly 100 do coupon and yield roughly match.