What Is the Difference Between Coupon Rate and Yield-To-Maturity?

Written By Security Bank ()

Updated at September 9th, 2020

Coupon rate is expressed as the percentage (per annum basis) of the face value of the bond. It is the amount that the bondholders will receive for holding the bond. Coupon payments are usually made semi-annually or quarterly.

Yield-to-maturity (YTM), as the name states, is the rate of return that the investor/bondholder will receive, assuming the bond is held until maturity. YTM accounts for various factors like coupon rate, bond prices, and time remaining until maturity, as well as, difference between the face value and price.
Coupon rate is fixed at the issue date, whereas the YTM fluctuates due to market movement and the aforementioned factors.
 

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