# Coupon Amount and Coupon Yield

Please note that **Coupon amount** is the sum of money the bond holder receives as an interest payment at fixed intervals. **Coupon Yield** is the return that investor receives on his investment.

Coupon Amount = Face Value X Coupon rate

For example, in a 2021 GOI 6.50% security which has a face value of ` 1000, the investor will get the following:

- 1000 x 6.5% = ` 65 annually in the form of ` 32.5 every six months.
- ` 1000 back in 2021.

The Yield of the Bond is denoted as percentage of the Bond’s price at any point of time. It is denoted as following:

Coupon Yield % = (Coupon Amount / Price ) x 100.

In the above example, the face value is equal to the bond value i.e. ` 1000, so the Yield of Coupon will also be same i.e. 6.5%. But if the face value of the Coupon goes down, the coupon yield goes up. For example if we consider that the same bond has a value of ` 800, the yield of Bond will be as follows:

(65/800)x 100 = 8.125%

Similarly, if the value of the bond goes up, say ` 1200, then the Yield of the Bond will be as follows:

(65/1200)X100 = 5.416 %.

- For a given coupon amount, the Yield of the Bond is inversely proportional to its price.

Tags:Banking GK

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