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A bond's price is the present value of all future coupon payments plus the present value of the face value at maturity. When market yields rise above the coupon rate, the bond trades at a discount.
Review the inputs carefully and treat the output as an estimate. For decisions involving money, taxes, health, law, or security, compare the result with trusted professional guidance when needed.
What is a coupon rate?
The coupon rate is the annual interest rate stated on the bond, paid periodically to the bondholder as a percentage of the face value.
Why does bond price move inversely to yield?
When interest rates rise, existing bonds with lower coupons become less attractive, so their price falls to compensate investors with the higher effective yield.
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