understanding financial jargon
When a bond is issued it normally pays the investor a fixed return which is known as the coupon or fixed coupon.
If for example the bond is issues for £100 with a fixed coupon of £10 per annum then the initial yield is 10%. If the bond value falls to £95, the bond holder still gets paid £10 each year, so the yield will have risen to 10/95 or 10.52%
Similarly if the value of the bond rises above the face value of £100, the fixed coupon paid each year remains at 10p, so the yield will fall.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
We hope you found this information useful.
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