Question: Whats the difference between a coupon rate and a yield (yield to maturity)? How do these rates affect the price of a bond? Can a

  1. Whats the difference between a coupon rate and a yield (yield to maturity)? How do these rates affect the price of a bond? Can a bond ever sell for less than its face value? With words (about 6-8 sentences) and with Excel examples demonstrate the 3 possible relationships between the coupon rate and the yield and the subsequent impact on bond price:
    1. coupon = yield
    2. coupon > yield
    3. coupon < yield

Assume semi-annual payments and 7% coupon rate when you do the examples.

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