Calculate bond pricing, coupon payments, and yield to understand if a bond trades at a premium or discount.
The coupon rate is the fixed annual interest rate set when the bond is issued. Current yield is the annual coupon divided by the current market price, reflecting actual return at today’s price.
A bond trades at a premium (above face value) when its coupon rate is higher than the current market rate. Investors pay more because the bond pays more interest than new bonds.
Face value (par value) is the amount the bond issuer will repay at maturity. Most corporate and government bonds have a $1,000 face value.