16 Yield and Coupon Rate

In this video, we explore the relationship between a bond's coupon rate and its UTS maturity. UTS maturity acts as a constant discount rate, simplifying cash flow calculations compared to using individual spot rates for each period. We examine three scenarios with a £1,000 face value bond, a 5% UTS maturity, and a three-year term, varying the coupon rate from 3% to 8%. This demonstration illustrates how coupon rates directly influence bond prices, leading to concepts like pricing at a discount, par, and a premium. Understanding this relationship can provide shortcuts and self-checking mechanisms for bond valuation problems. Subscribe to @AxiomTutoringCourses.